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NORTH CAROLINA
REGISTER
Volume 19, Issue 01
Pages 1 - 173
July 1, 2004
This issue contains documents officially filed
through June 10, 2004.
Office of Administrative Hearings
Rules Division
424 North Blount Street (27601)
6714 Mail Service Center
Raleigh, NC 27699-6714
(919) 733-2678
FAX (919) 733-3462
Julian Mann III, Director
Camille Winston, Deputy Director
Molly Masich, Director of APA Services
Linda Dupree, Editorial Assistant
Dana Sholes, Editorial Assistant
Julie Brincefield, Editorial Assistant
IN THIS ISSUE
I. EXECUTIVE ORDERS
Executive Order No. 59 .................................................1
II. IN ADDITION
Tax Review Board Decisions .....................................2 - 36
III. PROPOSED RULES
Administration
Office for Historically Underutilized Businesses......38 - 43
State Building Commission......................................37 - 38
Education
State Board of Education...........................................70 - 84
Environment and Natural Resources
Radiation Protection Commission...........................43 - 70
Licensing Boards
Pharmacy, Board of....................................................84 - 86
IV. APPROVED RULES ...................................................87 - 151
Agriculture
Food and Drug Protection Division
Markets
Plant Industry
Structural Pest Control Division
Commerce
Banking Commission
Cemetery Commission
Environment and Natural Resources
Environmental Health
Environmental Management
Parks & Recreation Area Rules
Wildlife Resources & Water Safety
Health and Human Services
Adult Health
Medical Care Commission
Mental Health, Community Facilities & Services
Mental Health, General
Public Health Programs, Procedures for
Justice
Private Protective Services
Licensing Boards
Pharmacy, Board of
Real Estate Commission
Transportation
Motor Vehicle, Division of
V. CONTESTED CASE DECISIONS
Index to ALJ Decisions.................................................152
Text of Selected Decisions
02 EDC 2310 ...............................................................153 - 173
For the CUMULATIVE INDEX to the NC Register go to:
http://oahnt.oah.state.nc.us/register/CI.pdf
North Carolina Register is published semi-monthly for $195 per year by the Office of Administrative Hearings, 424 North Blount Street, Raleigh, NC
27601. North Carolina Register (ISSN 15200604) to mail at Periodicals Rates is paid at Raleigh, NC. POSTMASTER: Send Address changes to
the North Carolina Register, 6714 Mail Service Center, Raleigh, NC 27699-6714.
NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM
The North Carolina Administrative Code (NCAC) has four major classifications of rules. Three of these, titles, chapters, and sections are
mandatory. The major classification of the NCAC is the title. Each major department in the North Carolina executive branch of
government has been assigned a title number. Titles are further broken down into chapters which shall be numerical in order.
Subchapters are optional classifications to be used by agencies when appropriate.
NCAC TITLES TITLE 21
LICENSING BOARDS
TITLE 24
INDEPENDENT AGENCIES
1 ADMINISTRATION
2 AGRICULTURE & CONSUMER SERVICES
3 AUDITOR
4 COMMERCE
5 CORRECTION
6 COUNCIL OF STATE
7 CULTURAL RESOURCES
8 ELECTIONS
9 GOVERNOR
10A HEALTH AND HUMAN SERVICES
11 INSURANCE
12 JUSTICE
13 LABOR
14A CRIME CONTROL & PUBLIC SAFETY
15A ENVIRONMENT &NATURAL RESOURCES
16 PUBLIC EDUCATION
17 REVENUE
18 SECRETARY OF STATE
19A TRANSPORTATION
20 TREASURER
21* OCCUPATIONAL LICENSING BOARDS
22 ADMINISTRATIVE PROCEDURES
(REPEALED)
23 COMMUNITY COLLEGES
24* INDEPENDENT AGENCIES
25 STATE PERSONNEL
26 ADMINISTRATIVE HEARINGS
27 NC STATE BAR
28 JUVENILE JUSTICE AND DELINQUENCY
PREVENTION
1 Acupuncture
2 Architecture
3 Athletic Trainer Examiners
4 Auctioneers
6 Barber Examiners
8 Certified Public Accountant Examiners
10 Chiropractic Examiners
11 Employee Assistance Professionals
12 General Contractors
14 Cosmetic Art Examiners
16 Dental Examiners
17 Dietetics/Nutrition
18 Electrical Contractors
19 Electrolysis
20 Foresters
21 Geologists
22 Hearing Aid Dealers and Fitters
25 Interpreter/Transliterator (Reserved)
26 Landscape Architects
28 Landscape Contractors
29 Locksmith Licensing
30 Massage & Bodywork Therapy
31 Marital and Family Therapy
32 Medical Examiners
33 Midwifery Joint Committee
34 Funeral Service
36 Nursing
37 Nursing Home Administrators
38 Occupational Therapists
40 Opticians
42 Optometry
44 Osteopathic Examination (Repealed)
45 Pastoral Counselors, Fee-Based Practicing
46 Pharmacy
48 Physical Therapy Examiners
50 Plumbing, Heating & Fire Sprinkler
Contract ors
52 Podiatry Examiners
53 Professional Counselors
54 Psychology
56 Professional Engineers & Land Surveyors
57 Real Estate Appraisal
58 Real Estate Commission
60 Refrigeration Examiners
61 Respiratory Care
62 Sanitarian Examiners
63 Social Work Certification
64 Speech & Language Pathologists &
Audiologists
65 Therapeutic Recreation Certification
66 Veterinary Medical
68 Substance Abuse Professionals
69 Soil Scientists
1 Housing Finance
2 Agricultural Finance Authority
3 Safety & Health Review
Board
4 Reserved
5 State Health Plan Purchasing
Alliance Board
Note: Title 21 contains the chapters of the various occupational licensing boards and Title 24 contains the chapters of independent agencies.
NORTH CAROLINA REGISTER
Publication Schedule for January 2004 – December 2004
FILING DEADLINES NOTICE OF TEXT PERMANENT RULE TEMPORARY
RULES
Volume &
issue
number
Issue date Last day
for filing
Earliest date for
public hearing
End of required
comment
period
Deadline to submit
to RRC
for review at
next meeting
Earliest Eff.
Date of
Permanent Rule
Delayed Eff. Date of
Permanent Rule
(first legislative
day of the next
regular session)
270th day from publication
in the Register
18:13 01/02/04 12/08/03 01/17/04 03/02/04 03/22/04 05/01/04 05/10/04 09/28/04
18:14 01/15/04 12/19/03 01/30/04 03/15/04 03/22/04 05/01/04 05/10/04 10/11/04
18:15 02/02/04 01/09/04 02/17/04 04/02/04 04/20/04 06/01/04 01/26/05 10/29/04
18:16 02/16/04 01/26/04 03/02/04 04/16/04 04/20/04 06/01/04 01/26/05 11/12/04
18:17 03/01/04 02/09/04 03/16/04 04/30/04 05/20/04 07/01/04 01/26/05 11/26/04
18:18 03/15/04 02/23/04 03/30/04 05/14/04 05/20/04 07/01/04 01/26/05 12/10/04
18:19 04/01/04 03/11/04 04/16/04 06/01/04 06/21/04 08/01/04 01/26/05 12/27/04
18:20 04/15/04 03/24/04 04/30/04 06/14/04 06/21/04 08/01/04 01/26/05 01/10/05
18:21 05/03/04 04/12/04 05/18/04 07/02/04 07/20/04 09/01/04 01/26/05 01/28/05
18:22 05/17/04 04/26/04 06/01/04 07/16/04 07/20/04 09/01/04 01/26/05 02/11/05
18:23 06/01/04 05/10/04 06/16/04 08/02/04 08/20/04 10/01/04 01/26/05 02/26/05
18:24 06/15/04 05/24/04 06/30/04 08/16/04 08/20/04 10/01/04 01/26/05 03/12/05
19:01 07/01/04 06/10/04 07/16/04 08/30/04 09/20/04 11/01/04 01/26/05 03/28/05
19:02 07/15/04 06/23/04 07/30/04 09/13/04 09/20/04 11/01/04 01/26/05 04/11/05
19:03 08/02/04 07/12/04 08/17/04 10/01/04 10/20/04 12/01/04 01/26/05 04/29/05
19:04 08/16/04 07/26/04 08/31/04 10/15/04 10/20/04 12/01/04 01/26/05 05/13/05
19:05 09/01/04 08/11/04 09/16/04 11/01/04 11/22/04 01/01/05 01/26/05 05/29/05
19:06 09/15/04 08/24/04 09/30/04 11/15/04 11/22/04 01/01/05 01/26/05 06/12/05
19:07 10/01/04 09/10/24 10/16/04 11/30/04 12/20/04 02/01/05 05/00/06 06/28/05
19:08 10/15/04 09/24/04 10/30/04 12/14/04 12/20/04 02/01/05 05/00/06 07/12/05
19:09 11/01/04 10/11/04 11/16/04 12/31/04 01/20/05 03/01/05 05/00/06 07/29/05
19:10 11/15/04 10/22//04 11/30/04 01/14/05 01/20/05 03/01/05 05/00/06 08/12/05
19:11 12/01/04 11/05/04 12/16/04 01/31/05 02/21/05 04/01/05 05/00/06 08/28/05
19:12 12/15/04 11/22/04 12/30/04 02/14/05 02/21/05 04/01/05 05/00/06 09/11/05
EXPLANATION OF THE PUBLICATION SCHEDULE
This Publication Schedule is prepared by the Office of Administrative Hearings as a public service and the computation of time periods are not to be deemed binding or controlling.
Time is computed according to 26 NCAC 2C .0302 and the Rules of Civil Procedure, Rule 6.
GENERAL
The North Carolina Register shall be published twice
a month and contains the following information
submitted for publication by a state agency:
(1) temporary rules;
(2) notices of rule-making proceedings;
(3) text of proposed rules;
(4) text of permanent rules approved by the Rules
Review Commission;
(5) notices of receipt of a petition for municipal
incorporation, as required by G.S. 120-165;
(6) Executive Orders of the Governor;
(7) final decision letters from the U.S. Attorney
General concerning changes in laws affecting
voting in a jurisdiction subject of Section 5 of
the Voting Rights Act of 1965, as required by
G.S. 120-30.9H;
(8) orders of the Tax Review Board issued under
G.S. 105-241.2; and
(9) other information the Codifier of Rules
determines to be helpful to the public.
COMPUTING TIME: In computing time in the
schedule, the day of publication of the North Carolina
Register is not included. The last day of the period so
computed is included, unless it is a Saturday, Sunday,
or State holiday, in which event the period runs until
the preceding day which is not a Saturday, Sunday, or
State holiday.
FILING DEADLINES
ISSUE DATE: The Register is published on the first
and fifteen of each month if the first or fifteenth of
the month is not a Saturday, Sunday, or State holiday
for employees mandated by the State Personnel
Commission. If the first or fifteenth of any month is
a Saturday, Sunday, or a holiday for State employees,
the North Carolina Register issue for that day will be
published on the day of that month after the first or
fifteenth that is not a Saturday, Sunday, or holiday for
State employees.
LAST DAY FOR FILING: The last day for filing for any
issue is 15 days before the issue date excluding
Saturdays, Sundays, and holidays for State
employees.
NOTICE OF TEXT
EARLIEST DATE FOR PUBLIC HEARING: The hearing
date shall be at least 15 days after the date a notice of
the hearing is published.
END OF REQUIRED COMMENT PERIOD
An agency shall accept comments on the text of a
proposed rule for at least 60 days after the text is
published or until the date of any public hearings held
on the proposed rule, whichever is longer.
DEADLINE TO SUBMIT TO THE RULES REVIEW
COMMISSION: The Commission shall review a rule
submitted to it on or before the twentieth of a month
by the last day of the next month.
FIRST LEGISLATIVE DAY OF THE NEXT REGULAR
SESSION OF THE GENERAL ASSEMBLY: This date is
the first legislative day of the next regular session of
the General Assembly following approval of the rule
by the Rules Review Commission. See G.S. 150B-
21.3, Effective date of rules.
EXECUTIVE ORDERS
19:01 NORTH CAROLINA REGISTER July 1, 2004
1
EXECUTIVE ORDER NO. 59
PROCLAMATION OF STATE OF DISASTER FOR THE TOWNS OF
BOLTON, LAKE WACCAMAW, CHADBOURN, TABOR CITY AND
FAIR BLUFF AND THE CITY OF WHITEVILLE
WHEREAS, I have determined that a State of Disaster and State of Emergency, as defined in N.C.G.S. §§ 166A-4 and
14.288.1(10), exists in the State of North Carolina, specifically in the Towns of Bolton, Lake Waccamaw, Chadbourn, Tabor City, and
Fair Bluff and the City of Whiteville as a result of the January 26-27, 2004, ice storm.
WHEREAS, on January 26 and 27, 2004, the Towns of Bolton, Lake Waccamaw, Chadbourn, Tabor City, and Fair Bluff and
the City of Whiteville proclaimed a local State of Emergency;
WHEREAS, pursuant to N.C.G.S. § 166A-6, the criteria of Type I disaster are met including the following: 1) Receipt of the
preliminary damage assessment from the Secretary of Crime Control and Public Safety; 2) The Towns of Bolton, Lake Waccamaw,
Chadbourn, Tabor City and Fair Bluff and the City of Whiteville declared a local state of emergency pursuant to N.C.G.S. § 166A-8
and N.C.G.S. §§ 14-288.12, 14-288.13 and 14-288.14, and forwarded a written copy of the declaration to the Governor; 3) The
preliminary damage assessment meets or exceeds the criteria established for the Small Business Disaster Loan Program pursuant to 13
C.F.R. Part 123, or meets or exceeds the State infrastructure criteria set out in N.C.G.S. § 166A-6.01(b)(2)a; and, 4) A major disaster
declaration by the President of the United States pursuant to the Stafford Act has not been declared; and
NOW THEREFORE, pursuant to the authority vested in me as Governor by the Constitution and the laws of the State of
North Carolina, IT IS ORDERED:
Section 1. Pursuant to N.C.G.S. §§ 166A-6 and 14-288.15, a State of Disaster and State of Emergency is hereby
declared for the Towns of Bolton, Lake Waccamaw, Chadbourn, Tabor City and Fair Bluff and the City of Whiteville. Brunswick
Electric Membership Corporation in Columbus County and Four County Electric Membership Corporation in Bladen and Columbus
Counties are eligible entities, for purposes of reimbursement, as defined by N.C.G.S. § 166A -4(3).
Section 2. State and local government entities and agencies are hereby ordered to cooperate in the implementation of
the provisions of this proclamation and the provisions of the North Carolina Emergency Operations Plan.
Section 3. Bryan E. Beatty, Secretary of Crime Control and Public Safety and/or his designee, is hereby delegated all
power and authority granted to me and required of me by Chapter 166A and Article 36A of Chapter 14 of the General Statutes for the
purpose of implementing the said Emergency Operations Plan and to take such further action as is necessary to promote and secure the
safety and protection of the populace in the above-referenced City.
Section 4. Further, Bryan E. Beatty, Secretary of Crime Control and Public Safety, as chief coordinating officer of the
State of North Carolina, shall exercise the powers prescribed in N.C.G.S. § 143B-476.
Section 5. I authorize this proclamation: (a) to be distributed to the news media and other organizations calculated to
bring its contents to the attention of the general public; (b) unless the circumstances of the state of disaster prevent or impede, to be
promptly filed with the Secretary of Crime Control and Public Safety, the Secretary of State, and the clerks of superior court in the
counties to which it applies; and (c) to be distributed to others as necessary to assure proper implementation of this proclamation.
Section 6 The Type I disaster declaration shall expire 30 days after the issuance of the state of disaster and state of
emergency and Type I disaster proclamation for the Towns of Bolton, Lake Waccamaw, Chadbourn, Tabor City and Fair Bluff and
the City of Whiteville, issued on June 1, 2004, unless renewed by the Governor or the General Assembly. Such renewals may be
made in increments of 30 days each, not to exceed a total of 120 days from the date for first issuance. The Joint Legislative
Commission on Governmental Operations shall be notified prior to the issuance of any renewal of a Type I disaster declaration.
Done in the Capital City of Raleigh, North Carolina this the 1st day of June, 2004.
___________________________________
MICHAEL F. EASLEY
GOVERNOR
ATTEST:
___________________________________
ELAINE MARSHALL
SECRETARY OF STATE
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
2
Note from the Codifier: This Section contains public notices that are required to be published in the Register or have been
approved by the Codifier of Rules for publication.
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Additional )
Sales and Use Tax for the period of )
January 1, 1994, through November 30, )
1996 by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 426
)
Vanderbilt Mortgage & Finance, Incorporated )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, on Friday, September 26, 2003, upon a petition filed by Vanderbilt Mortgage & Finance, Incorporated (hereafter
“Taxpayer”) for administrative review of the Final Decision of the Assistant Secretary of Revenue entered on July 11, 2002,
sustaining the sales and use tax assessment imposed against the Taxpayer for the period of August 1, 1995 through June 30, 2001.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with ex officio member Jo Anne Sanford, Chair,
Utilities Commission and duly appointed member, Noel L. Allen, Attorney at Law participating.
STATEMENT OF FACTS
The Taxpayer is a corporation engaged primarily in the business of financing of manufactured homes. The Taxpayer also
sells manufactured homes that are repossessed upon default of the buyers. The homes financed are either sold by independent
manufactured home dealers or by a related company’s manufactured home dealer. The homes sold on independent dealer sales lots
were sold under no-recourse agreements and those sold by a related company dealer sales lot were sold pursuant to full recourse
agreements.
On July 31, 2001, auditors with the Department of Revenue completed an examination of the Taxpayer’s records and
proposed to assess additional tax, penalty, and interest. The additional tax resulted from the Taxpayer’s sales of no-recourse
repossessed manufactured homes. The Taxpayer did not charge, collect or remit said tax on these taxable repossessed manufactured
homes. The Taxpayer objected to the assessment and timely requested a hearing before the Secretary of Revenue. On July 11, 2002,
the Assistant Secretary issued his final decision that sustained the assessment of tax, penalty and interest against the Taxpayer for the
period at issue. Pursuant to N.C. Gen. Stat. § 105-241.2, Taxpayer timely filed a notice of intent and petition for administrative review
of the Assistant Secretary’s Final Decision with the Tax Review Board.
ISSUE
The issues considered by the Board on review of this matter are stated as follows:
1. Are the Taxpayer’s sales of the no-recourse repossessed manufactured homes subject to the 2% State sales or use tax with a
maximum tax of $300.00 per article?
2. Does the fact that some repossessed manufactured homes are taxable and some are not taxable, based on the fact that some
were originally sold under no-recourse agreements and other under recourse agreements, mean that all repossessed
manufactured homes should be non-taxable so as to present uniform fairness to the consumer?
3. Does the prior Installment Paper Dealer tax audit of the Taxpayer conducted by the Field Operations Division constitute
“erroneous written advice” pursuant to G.S. 105-264 by the Department and preclude the assessment of the additional sales
and use tax?
4. Is the Taxpayer making tax exempt “occasional or isolated” sales when no-recourse repossessed manufactured homes are
sold?
EVIDENCE
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
3
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Tax Review Board reviewed all the documents, records, data, evidence and
other materials that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the
documentation, that evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. The Taxpayer is primarily engaged in business as a financial organization; however the Taxpayer makes retail sales of no-recourse
manufactured homes, which have been repossessed.
2. The Taxpayer financed manufactured homes, which were sold either on independent dealer sales lots or on related company
sales lots (CMH Homes, Incorporated).
3. The homes sold on independent dealer sales lots were sold under a no-recourse agreement and those sold by a related
company dealer sales lot were sold pursuant to a full recourse agreement.
4. The Taxpayer has no-recourse against the independent selling dealer in the event of default by the original buyer of the
manufactured homes during the audit period.
5. The Taxpayer acquired ownership of the repossessed no-recourse manufactured homes at the time they were repossessed, due
to the default of the purchaser on their financing agreement with the Taxpayer.
6. The Department has assessed tax on the sale of the repossessed manufactured homes, which were originally sold under a no-recourse
agreement by independent dealer sales lots.
7. The Notice of Proposed assessment was mailed to the Taxpayer on August 15, 2001.
8. The Taxpayer notified the Department that it objected to the assessment on September 7, 2001 and timely requested a
hearing.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law made by the Assistant Secretary in his decision
regarding this matter:
1. G.S. 105-164.13(16) provides an exemption from sales tax provided the article is repossessed by the selling vendor and sales
tax was paid on the original sale of the article.
2. New, used and repossessed manufactured homes are offered for sale at various dealers lots; however, the taxable and non-taxable
sales tax status of the homes cannot be used to seek an exemption from sales tax by any retailer. Perfect equality in
the collection of the tax by retailers from consumers is, as a practical matter, impossible as between almost any two or more
retailers by reason of the differences in types of merchandise sold and selling methods, Fisher v. Jones, 15 N.C. App. 737,
190 S.E.2d 663 (1972).
3. The Department has no record of receipt of any written request from the Taxpayer for advice or written approval regarding
the Taxpayer's treatment of the sales tax liability on repossessed manufactured homes acquired and offered for sale. G.S.105-
83 “Installment paper dealers” is administered by the Corporate, Excise and Insurance Tax Division and the sales and use tax
assessment at issue is administered by the Sales and Use Tax Division. Therefore, the Department has not provided
erroneous sales tax advice and is not precluded from assessing sales tax against the Taxpayer due to a prior Installment Paper
Dealer audit for a prior period.
4. G.S. 105-164.3(1) cites no specific number of sales, which would constitute non-taxable “isolated or occasional sales”.
5. The Taxpayer's retail sales of $18,257,966.11 during the audit period do not constitute occasional or isolated sales.
6. The Taxpayer is a retailer making retail taxable sales under G.S. 105-164.3(13) and (14).
7. The Taxpayer is liable for the 2% State sales tax with a maximum of $300.00 per article on its sales of no-recourse
repossessed manufactured homes sold on independent dealer lots.
8. Notice of proposed assessment for the period August 1, 1995 through June 30, 2001 was properly issued pursuant to G.S.
105-241.1.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary.”
The Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concludes that the findings of fact made by the Assistant Secretary were
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
4
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 23rd day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
5
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated September 12, 2000 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 427
)
Celia Marie Morrison, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on December 10, 2003, pursuant to the petition of Celia Marie Morrison
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on November
16, 2001, and ruled that the Taxpayer was liable for an assessment in the sum of $11,350.00 and penalty in the sum of $4,540.00, plus
accrued interest.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by Enforcement Agent S. M. Brake of the Unauthorized Substances Tax Division, assessing $17,100.00 tax, $6,840.00
penalty and $114.00 interest, for a total proposed liability of $24,054.00. The assessment alleged that the Taxpayer had possessed
341.2 grams of cocaine without the proper tax stamps affixed. The Taxpayer protested the assessment and requested a hearing before
the Secretary of Revenue. On July 13, 2001, Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely
application and objection to the proposed assessment. On November 16, 2001, the Assistant Secretary issued the final decision, which
determined that the Taxpayer was liable for tax in the sum of $11,350.00 and penalty in the sum of $4,540.00, plus interest.
Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the Board.
ISSUES
1. Did the Taxpayer have actual and/or constructive possession of cocaine without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. On May 16, 2001, Secretary of Revenue E. Norris Tolson delegated to Assistant Secretary Eugene J. Cella the authority to
hold any hearing required or allowed under Chapter 105 of the General Statutes.
2. Assessment of Unauthorized Substance Tax was made against the Taxpayer on September 12, 2000, in the sum of
$17,100.00 tax, $6,840.00 penalty and $114.00 interest, for a total proposed liability of $24,054.00, based upon possession of
341.2 grams of cocaine.
3. The Taxpayer made timely objection and application for a hearing.
4. The one gram of cocaine the Taxpayer admitted to possessing in September 2000 represents a nontaxable quantity.
5. A clear preponderance of the evidence, namely the three sales of 30, 90 and 50 grams of cocaine in August 2000, shows that
the Taxpayer possessed cocaine in discrete quantities that exceeded the minimum taxable threshold of seven grams. No
evidence was introduced to contradict this finding.
6. There is insufficient evidence that the four ounces of cocaine the Taxpayer admitted to possessing in August 2000 had not
already been taxed pursuant to the three undercover buys of 30, 90 and 50 grams, which were separately assessed.
7. On September 8, 2000, the Taxpayer voluntarily signed a statement wherein she admitted possessing a total of eight ounces
(226.8 grams) of cocaine between January and July, 2000, and these quantities are subject to the unauthorized substance tax.
No evidence was introduced to contradict the officer’s testimony that the Taxpayer was not impaired at the time she gave the
statement.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
6
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome this presumption, and this burden was partially
met.
3. The Taxpayer possessed in discrete taxable quantities a total of eight ounces (226.8 grams) of cocaine between January and
July, 2000, and was therefore a dealer as that term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $11,350.00 and penalty in the sum of $4,540.00, plus accrued interest.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax
assessment is presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption,
the Taxpayer must offer evidence to show that the assessment is not proper.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into the 18th day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
7
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated May 8, 2001 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 428
)
David Paul Shelman, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on December 10, 2003, pursuant to the petition of David Paul Shelman
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on October 4,
2001, sustaining a proposed assessment of unauthorized substance tax dated May 8, 2001.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by J.L. Mozingo, Enforcement Agent of the Unauthorized Substances Tax Division, assessing $10,000.00 tax, $4,000.00
penalty and $66.67 interest, for a total proposed liability of $14,066.67. The assessment alleged that on April 30, 2001, the Taxpayer
possessed 2,000 dosages of methamphetamine without the proper tax stamps affixed.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. At the request of the
Taxpayer’s attorney, the hearing was conducted via written communication in lieu of a personal appearance. The record upon which
the Assistant Secretary based his decision was closed on September 3, 2001, for purposes of G.S. 105-241.1. On October 4, 2001, the
Assistant Secretary issued the final decision sustaining the proposed assessment. Thereafter, the Taxpayer timely filed a petition for
administrative review of the final decision with the Board.
ISSUES
1. Did the Taxpayer have actual and/or constructive possession of methamphetamine without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented for the Assistant Secretary to consider. Based upon the Board’s review of the documentation, that evidence
is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on May 8, 2001, in the sum of $10,000.00 tax,
$4,000.00 penalty and $66.67 interest, for a total proposed liability of $14,066.67, based on possession of 2,000 dosages of
methamphetamine.
2. The Taxpayer made timely objection and application for a hearing.
3. On April 30, 2001, the Taxpayer had actual possession of 2,000 dosages of methamphetamine.
4. No tax stamps were purchased for or affixed to the methamphetamine as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption of correctness, and that burden
was not met.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
8
3. The Taxpayer had unauthorized possession of 2,000 dosages of methamphetamine on April 30, 2001 and was therefore a
dealer as that term is defined in G.S. 105-113.106 (3).
4. The Taxpayer is liable for $10,000 tax, $4,000.00 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented to the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is
presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption, the taxpayer
must offer evidence to show that the assessment is not correct.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into the 18th day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
9
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Sales and Use )
Tax for the period February 1, 1997 through )
November 30 1999, by the Secretary of Revenue )
of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 429
)
Systel Business Equipment Company, Inc )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on December 10, 2003, pursuant to the petition of Systel Business Equipment
Company, Incorporated (hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of
Revenue on March 18, 2003, sustaining a proposed assessment of sales and use taxes for the period of February 1, 1997 through
November 30, 1999.
STATEMENT OF CASE
The Taxpayer is a corporation engaged in the business of selling, leasing and servicing office copying machines and other
office equipment. In 1999, the Department of Revenue audited the Taxpayer for the period of February 1, 1997 through November
30, 1999. On February 2, 2000, the Department of Revenue issued the Field Auditor’s Report reflecting the auditor’s determination of
taxes due. The Taxpayer submitted a written objection to the assessment and timely requested a hearing before the Secretary of
Revenue. After conducting a hearing, the Assistant Secretary of Revenue rendered a final decision on March 18, 2003 sustaining a
proposed assessment of sales and use taxes for the period of February 1, 1997 through November 30, 1999. Thereafter the Taxpayer
filed a timely notice of intent and petition for administrative review with the Board.
ISSUES
Whether the amounts received by the Taxpayer under its operational maintenance agreements are subject to sales taxes.
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, and evidence that the parties
presented at the hearing before the Assistant Secretary of Revenue and reviewed the final decision entered by the Assistant Secretary
of Revenue in this matter.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
The Taxpayer is engaged in the business of selling, leasing and servicing copying machines and other office machines and
equipment. The central issue in this matter is the application of tax to the transactions involving maintenance contracts for customers
that own copiers or lease copiers from a lessor other than the Taxpayer. The Ta xpayer collected and remitted sales tax on the fees it
charged its customers for optional maintenance agreements. The Department of Revenue argued at the hearing before the Assistant
Secretary that these arrangements did not constitute retail sales, and that the fees that the Taxpayer charged its customers for the
optional maintenance agreements were not taxable. Thus, the Department of Revenue alleged that the Taxpayer owed use tax on its
cost of any tangible personal property used to fulfill its optional maintenance agreements.
In the petition for administrative review of the final decision, and the memorandum in support thereto, the Taxpayer presents
its argument that it “sells” supplies and repair parts to customers holding maintenance contracts with its business. In the final
decision, the Assistant Secretary sustained the proposed assessment in this matter and concluded the Taxpayer was liable for “use”
taxes on the items under the maintenance contracts because the Taxpayer had consumed the items while providing nontaxable
services. In particular, the Assistant Secretary concluded that the fees charged by the Taxpayer under the optional maintenance
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
10
agreements do not constitute a sale of tangible personal property and are not subject to sales tax and that the parts and supplies used by
the Taxpayer to fulfill the optional maintenance agreements are subject to State and local use tax.
The Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
documents of record and the Assistant Secretary’s final decision, and having considered the arguments of counsel at the hearing,
concludes that the record does not contain sufficient evidence to confirm the final decision in this matter. Thus, the Board concludes
that the findings of fact made by the Assistant Secretary were not supported by competent evidence in the record; that based upon the
findings of fact, the Assistant Secretary’s conclusions of law were not fully supported by the findings of fact; therefore the decision of
the Assistant Secretary should not be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be and is hereby Reversed.
Made and entered into 9th day of March 2004.
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
Chairman Richard H. Moore did not participate in the decision regarding this matter.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
11
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated November 2, 2000 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 430
)
James Green Hamilton, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on December 10, 2003, pursuant to the petition of James Green Hamilton
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on October 30,
2001, sustaining a proposed assessment of unauthorized substance tax dated November 2, 2000.
Pursuant to G.S. § 105-113.111(a) and G.S. § 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to
the Taxpayer by Enforcement Agent Brian Zieverink, of the Unauthorized Substance Tax Division, assessing $700.00 tax, $280.00
penalty and $4.67 interest, for a total liability of $984.67. The assessment alleged that on October 18, 2000, the Taxpayer was in
unauthorized possession of 13 dosages of Adderall and 22 dosages of methadone. The Taxpayer protested the assessment and
requested a hearing before the Secretary of Revenue. On July 6, 2001, Eugene J. Cella, Assistant Secretary conducted a hearing upon
Taxpayer’s timely application and objection to the proposed assessment. On October 30, 2001, the Assistant Secretary issued the final
decision sustaining the proposed assessment. Thereafter, the Taxpayer timely filed a petition for administrative review of the final
decision with the Board.
ISSUES
1. Did the Taxpayer have actual and/or constructive possession of Adderall and methadone without the proper tax stamps
affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on November 2, 2000, in the sum of $700.00 tax,
$280.00 penalty and $4.67 interest, for a total liability of $984.67, based upon possession of 13 dosages of Adderall and 22
dosages of methadone.
2. The Taxpayer made timely objection and application for a hearing.
3. The Taxpayer did not obtain the Adderall and methadone in a legal manner; therefore the possession of the same is
unauthorized and subject to tax.
4. On October 18, 2000, the Taxpayer had constructive possession of 13 dosages of Adderall and 22 dosages of methadone
without the proper tax stamps affixed thereto.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and that burden was not met.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
12
3. On October 18, 2000, the Taxpayer possessed 13 dosages of Adderall and 22 dosages of methadone and was therefore a
dealer as that term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $700.00 tax, $280.00 penalty and accrued interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax
assessment is presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption,
the taxpayer must offer evidence to show that the assessment is not correct.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decis ion, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into 18th day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
Chair, Utilities Commission
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
13
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1991, )
and 1992 by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 431
)
Sydney N. Shepard, )
Taxpayer )
THIS MATTER is before the regular Tax Review Board (hereinafter “Board”) upon petition for administrative review filed
by Sydney N. Shepherd (hereinafter "Taxpayer") regarding the final decision of Eugene Cella, Assistant Secretary of Revenue
(hereinafter "Assistant Secretary"), entered on March 12, 2003, sustaining the proposed assessments of additional individual income
tax for taxable years 1991, and 1992.
Pursuant to G.S. 105-241.1, the Department of Revenue mailed the Taxpayer Notices of Individual Income Tax Assessments
proposing the assessments of additional income tax, plus penalties, and accrued interest for the taxable years of 1991 and 1992. The
Taxpayer objected to the assessments and filed a request for hearing. After conducting a hearing, the Assistant Secretary of Revenue
entered a final decision on March 12, 2003, sustaining the proposed assessments. Pursuant to G.S. 105-241.2, the Taxpayer filed a
notice of intent with the Board on April 11, 2003. On June 13, 2003, the Taxpayer filed a Petition to dismiss the State Tax Board
Action, an Objection to Policy and a Motion to extend time to seek competent counsel. On September 23, 2003, the Secretary of
Revenue filed a motion to dismiss this matter for failure of the Taxpayer to timely file the petition for administrative review with the
Tax Review Board. The Board has reviewed the Department of Revenue’s motion to dismiss the Taxpayer’s appeal.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, and the records and documents transmitted by the
Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer did not timely file the petition and
while it may be appropriate to grant the motion to dismiss; the Taxpayer’s petition is dismissed since the grounds and arguments upon
which relief is sought have been repeatedly deemed by the Courts to be lacking in legal merit. Thus, the Board concludes that
Taxpayer’s petition is frivolous and is filed for the purpose of delay.
IT IS THEREFORE ORDERED that the Taxpayer’s petition for review be and is hereby Dismissed.
Made and entered into 18th day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
Chair, Utilities Commission
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
14
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated August 2, 2002 )
by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 432
)
Daniel Joseph Watts, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Daniel Joseph Watts
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on July 17,
2003, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to N.C.G.S. 105-113.111 and N.C.G.S. 105-241.1(a)&(b), a notice of proposed assessment was served on the
Taxpayer in person by an Enforcement Agent with the Unauthorized Substances Tax Division. The notice alleged that on August 2,
2002, the Taxpayer was in unauthorized possession of 53,075 grams (117 pounds) of marijuana, to which no tax stamps were affixed.
The notice proposed an assessment comprised of excise tax in the amount of $185,762.50, penalties totaling $74,305.00, and interest
in the amount of $928.81, for a total proposed tax liability of $260,996.31.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On March 12, 2003,
Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed
assessment. On July 17, 2003, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together
with penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the
Board.
ISSUES
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Law enforcement had received complaints about the Taxpayer selling and storing large amounts of marijuana on his property.
2. On the evening of August 1, 2002, officers with the Robeson County Sheriff’s Office performed a search of the Taxpayer’s
property.
3. Prior to beginning the search, the Taxpayer appeared to the officers to be very nervous: He couldn't stand still and his hands
were shaking. Officers noted the Taxpayer’s nervousness increased noticeably as they approached an outbuilding on the
Taxpayer’s property.
4. When asked about the contents of the utility building, the Taxpayer told the officers that his wife had a tanning bed in the
outbuilding.
5. The outbuilding was locked. When requested by the officers, the Taxpayer opened the building with a silver key that he had
on his person.
6. A search of the outbuilding revealed 33 bundles of marijuana beneath a trapdoor and a tanning bed.
7. The Taxpayer had over $1,750.00 in cash on his person at the time he was arrested.
8. Also on the Taxpayer’s property, officers located a set of digital scales, a box of plastic bags, and vacuum-sealed bags that
had been torn open and contained marijuana residue. Officers also located several firearms and over $4,300.00 in cash in the
master bedroom and bathroom of the house on Taxpayer’s property.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
15
9. Using samples of green vegetable matter taken from each bundle, the SBI lab confirmed the material in each bundle was
marijuana.
10. The Taxpayer made the statement to investigators that if they had come three weeks later the marijuana would not have been
found since he was getting out of the business.
11. There is no evidence of law enforcement misconduct in the Taxpayer’s case.
12. On August 2, 2002, an assessment of unauthorized substance tax was made against the Taxpayer comprised of excise tax in
the amount of $185,762.50, penalties totaling $74,305.00, and interest in the amount of $928.81, for a total proposed tax
liability of $260,996.31, based upon the Taxpayer’s possession of 53,075 grams of marijuana. Notice of said assessment was
served on the Taxpayer in person.
13. Upon being assessed, and in a timely manner, the Taxpayer requested in writing an administrative tax hearing.
14. On August 2, 2002, the Taxpayer possessed 53,075 grams of marijuana.
15. The Taxpayer offered no evidence that any of the seized marijuana was harvested marijuana stems and stalks that had been
separated from and were not mixed with any other parts of the marijuana plant.
16. The Taxpayer has been arrested and convicted for possession of marijuana with intent to sell in the past.
17. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. A preponderance of the evidence supports the foregoing findings of fact; therefore the assessment of unauthorized substances
tax against the Taxpayer is concluded to be correct.
2. A proviso in a statute taxing certain possessions at a lower rate than that made applicable in general is a partial exemption
and is, therefore, to be strictly construed against the claim for such special or preferred treatment. Because the Taxpayer
presented no evidence that separated marijuana stems and stalks comprised a portion of the marijuana that he is being taxed
for possessing, the $.40 per gram rate is not applicable. The applicable tax rate is the $3.50 per grams rate generally
applicable to marijuana.
3. Without authorization, the Taxpayer constructively possessed 53,075 grams of marijuana on August 2, 2002, and was
therefore a “dealer” as that term is defined in N.C.G.S. 105-113.106(3).
4. N.C.G.S. 105-113.112 provides that any information obtained pursuant to the Unauthorized Substances Excise Tax Schedule
(N.C.G.S. 105-113.105 et seq.) is confidential and may not be disclosed or used in a criminal prosecution, unless that
information has been independently obtained by law enforcement officers. Thus, a taxpayer reporting possession of an
unauthorized substance for tax purposes does not incriminate himself as the tax itself is not a criminal but a civil matter, the
report may be made anonymously, and the report and any information obtained as a result of it cannot be disclosed by
Department employees to law enforcement for use in a criminal proceeding.
5. The United States Supreme Court has held that the exclusionary rule is not constitutionally mandated, but is a judicially
created means of deterring illegal searches and seizures. Where evidence is obtained in an allegedly illegal search in
furtherance of a criminal investigation, it is generally unlikely that application of the exclusionary rule to bar the evidence in
a secondary civil proceeding will deter future Fourth Amendment violations. Where, as in the instant unauthorized substance
excise tax assessment proceedings, the exclusion of evidence is unlikely to deter future Fourth Amendment violations by law
enforcement officers, the exclusionary rule does not apply, and evidence of possession of unauthorized substances found
pursuant to an allegedly unconstitutional search by law enforcement officers can be used by revenue authorities to make a tax
assessment.
6. The Taxpayer is liable for excise tax in the amount of $185,762.50, penalties totaling $74,305.00, and interest until date of
full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax
assessment is presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption,
the Taxpayer must offer evidence to show that the assessment is not proper.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
16
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
Chair, Utilities Commission
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
17
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated August 2, 2002 )
By the Secretary of Revenue )
) ADMINISTRATIVE DECISION
vs. ) Number: 433
)
Elizabeth Watts, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Elizabeth Watts
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on July 17,
2003, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to N.C.G.S. 105-113.111 and N.C.G.S. 105-241.1(a)&(b), a notice of proposed assessment was served on the
Taxpayer in person by an Enforcement Agent with the Unauthorized Substances Tax Division. The notice alleged that on August 2,
2002, the Taxpayer was in unauthorized possession of 53,075 grams (117 pounds) of marijuana, to which no tax stamps were affixed.
The notice proposed an assessment comprised of excise tax in the amount of $185,762.50, penalties totaling $74,305.00, and interest
in the amount of $928.81, for a total proposed tax liability of $260,996.31.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On March 12, 2003,
Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed
assessment. On July 17, 2003, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together
with penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the
Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Law enforcement had received complaints about the Taxpayer selling and storing large amounts of marijuana on her
property.
2. On the evening of August 1, 2002, officers with the Robeson County Sheriff’s Office performed a search of the Taxpayer’s
property.
3. Prior to beginning the search, the Taxpayer’s husband appeared to the officers to be very nervous: He couldn't stand still and
his hands were shaking. Officers noted the Taxpayer’s husband’s nervousness increased noticeably as they approached an
outbuilding on the Taxpayer’s property.
4. The Taxpayer was present on the property throughout the period of the search.
5. A search of the outbuilding revealed 33 bundles of marijuana beneath a trapdoor and a tanning bed that the Taxpayer’s
husband said was the Taxpayer’s.
6. Using samples of green vegetable matter taken from each bundle, the SBI lab confirmed the material in each bundle was
marijuana.
7. The Taxpayer’s husband made the statement to investigators that if they had come three weeks later the marijuana would not
have been found since he was getting out of the business.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
18
8. There is no evidence of law enforcement misconduct in the Taxpayer’s case.
9. On August 2, 2002, an assessment of unauthorized substance tax was made against the Taxpayer comprised of excise tax in
the amo unt of $185,762.50, penalties totaling $74,305.00, and interest in the amount of $928.81, for a total proposed tax
liability of $260,996.31, based upon the Taxpayer’s possession of 53,075 grams of marijuana. Notice of said assessment was
served on the Taxpayer in person.
10. Upon being assessed, and in a timely manner, the Taxpayer requested in writing an administrative tax hearing.
11. On August 2, 2002, the Taxpayer possessed 53,075 grams of marijuana.
12. The Taxpayer offered no evidence that any of the seized marijuana was harvested marijuana stems and stalks that had been
separated from and were not mixed with any other parts of the marijuana plant.
13. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. A preponderance of the evidence supports the foregoing findings of fact; therefore the assessment of unauthorized substances
tax against the Taxpayer is concluded to be correct.
2. A proviso in a statute taxing certain possessions at a lower rate than that made applicable in general is a partial exemption
and is, therefore, to be strictly construed against the claim for such special or preferred treatment. Because the Taxpayer
presented no evidence that separated marijuana stems and stalks comprised a portion of the marijuana that she is being taxed
for possessing, the $.40 per gram rate is not applicable. The applicable tax rate is the $3.50 per grams rate generally
applicable to marijuana.
3. Where, inter alia, such a large quantity of marijuana is found on the Taxpayer's property in close proximity to the house
located thereon, and where the Taxpayer's personal property (a tanning bed) is found in the same location as the seized
marijuana, and where large amounts of cash which cannot be explained by the Taxpayer are found within the house along
with several firearms, and where the Taxpayer is present when the marijuana is seized, and where the Taxpayer knew that her
husband had been convicted of possessing marijuana with intent to sell it in the past, it is permissible to infer that the
Taxpayer had constructive possession of the seized marijuana.
4. Without authorization, the Taxpayer constructively possessed 53,075 grams of marijuana on August 2, 2002, and was
therefore a “dealer” as that term is defined in N.C.G.S. 105-113.106(3).
5. N.C.G.S. 105-113.112 provides that any information obtained pursuant to the Unauthorized Substances Excise Tax Schedule
(N.C.G.S. 105-113.105 et seq.) is confidential and may not be disclosed or used in a criminal prosecution, unless that
information has been independently obtained by law enforcement officers. Thus, a taxpayer reporting possession of an
unauthorized substance for tax purposes does not incriminate herself as the tax itself is not a criminal but a civil matter, the
report may be made anonymously, and the report and any information obtained as a result of it cannot be disclosed by
Department employees to law enforcement for use in a criminal proceeding.
6. The United States Supreme Court has held that the exclusionary rule is not constitutionally mandated, but is a judicially
created means of deterring illegal searches and seizures. Where evidence is obtained in an allegedly illegal search in
furtherance of a criminal investigation, it is generally unlikely that application of the exclusionary rule to bar the evidence in
a secondary civil proceeding will deter future Fourth Amendment violations. Where, as in the instant unauthorized substance
excise tax assessment proceedings, the exclusion of evidence is unlikely to deter future Fourth Amendment violations by law
enforcement officers, the exclusionary rule does not apply, and evidence of possession of unauthorized substances found
pursuant to an allegedly unconstitutional search by law enforcement officers can be used by revenue authorities to make a tax
assessment.
7. The Taxpayer is liable for excise tax in the amount of $185,762.50, penalties totaling $74,305.00, and interest until date of
full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
taxpayer to rebut that presumption. In order to rebut the presumption, the Taxpayer must offer evidence to show that the assessment is
not proper. It is the function of this Board, upon administrative review, to review the record and determine whether the final decision
is proper based upon the evidence in the record. From a review of the record, the Board determines that the Taxpayer did not provide
sufficient evidence to show that the assessment is not proper.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
19
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
20
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated December 28, 2001 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 434
)
Anthony Jerome McClure, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Anthony Jerome
McClure (hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on
June 4, 2002, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by Enforcement Agent R. Earl Smith, of the Unauthorized Substances Tax Division, assessing $2,400.00 tax, $960.00
penalty and $16.00 interest, for a total proposed liability of $3,376.00. The assessment alleged that on November 30, 2001, the
Taxpayer was in unauthorized possession of 480 dosages of methamphetamine.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On April 3, 2002, Eugene
J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed assessment. On
June 4, 2002, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together with penalty and
interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of methamphetamine without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on December 28, 2001, in the sum of
$2,400.00 tax, $960.00 penalty and $16.00 interest, for a total proposed liability of $3,376.00, based upon possession of 480
dosages of methamphetamine.
2. The Taxpayer made timely objection and application for a hearing.
3. The Taxpayer’s knowledge and control of the contents of his property can be reasonably inferred, thus placing him in
constructive possession of the controlled substances found in his home and outbuilding.
4. On November 30, 2001, the Taxpayer had possession of 480 dosages of methamphetamine without proper tax stamps affixed
thereto.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and this burden was not met.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
21
3. On November 30, 2001, the Taxpayer had possession of 480 dosages of methamphetamine and was therefore a dealer as that
term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $2,400.00 and penalty in the sum of $960.00, plus accrued interest.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
taxpayer to rebut that presumption. In order to rebut the presumption, the Taxpayer must offer evidence to show that the assessment is
not proper.
It is the function of this Board, upon administrative review, to review the record and determine whether the final decision is
proper based upon the evidence presented at the hearing before the Assistant Secretary. From a review of the record the Board
determines that the Taxpayer did not provide sufficient evidence to show that the assessment is not proper. Thus, the Board having
conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole record and the Assistant
Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were supported by competent evidence
in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were fully supported by the findings of
fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
22
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated December 28, 2001 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 435
)
Roberta M. McClure, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Roberta M. McClure
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on June 4,
2002, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by Enforcement Agent R. Earl Smith, of the Unauthorized Substances Tax Division, assessing $2,400.00 tax, $960.00
penalty and $16.00 interest, for a total proposed liability of $3,376.00. The assessment alleged that on November 30, 2001, the
Taxpayer was in unauthorized possession of 480 dosages of methamphetamine.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On April 3, 2002, Eugene
J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed assessment. On
June 4, 2002, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together with penalty and
interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of methamphetamine without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on December 28, 2001, in the sum of
$2,400.00 tax, $960.00 penalty and $16.00 interest, for a total proposed liability of $3,376.00, based upon possession of 480
dosages of methamphetamine.
2. The Taxpayer made timely objection and application for a hearing.
3. The Taxpayer’s knowledge and control of the contents of her property can be reasonably inferred, thus placing her in
constructive possession of the controlled substances found in her home and outbuilding.
4. On November 30, 2001, the Taxpayer had possession of 480 dosages of methamphetamine without proper tax stamps affixed
thereto.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
23
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and this burden was not met.
3. On November 30, 2001, the Taxpayer had possession of 480 dosages of methamphetamine and was therefore a dealer as that
term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $2,400.00 and penalty in the sum of $960.00, plus accrued interest.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
taxpayer to rebut that presumption. In order to rebut the presumption, the Taxpayer must offer evidence to show that the assessment is
not proper.
It is the function of this Board, upon administrative review, to review the record and determine whether the final decision is
proper based upon the evidence presented at the hearing before the Assistant Secretary. From a review of the record the Board
determines that the Taxpayer did not provide sufficient evidence to show that the assessment is not proper. Thus, the Board having
conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole record and the Assistant
Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were supported by competent evidence
in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were fully supported by the findings of
fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
24
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated August 13, 2002 )
by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 436
)
Dino Vann Nixon, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Dino Vann Nixon
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on September
17, 2003, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was delivered by
U.S. Mail to the Taxpayer’s last known address of 3300 Waterway Road, East Bend, NC 27018. The notice alleged that on July 30,
2002, the Taxpayer was in unauthorized possession of 965 grams of marijuana, to which no tax stamps were affixed. The notice
proposed an assessment comprised of excise tax in the amount of $3,377.50, penalties totaling $1,351.00, and interest in the amount of
$16.89, for a total proposed tax liability of $4,745.39.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On May 21, 2003, Eugene
J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed assessment. On
September 17, 2003, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together with
penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary and reviewed the final decision entered by the Assistant
Secretary in this matter.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole
record, and the Assistant Secretary’s final decision, concludes that the record does not contain sufficient evidence to confirm the final
decision in this matter. Thus, the Board concludes that the findings of fact made by the Assistant Secretary were not supported by
competent evidence in the record; that based upon the findings of fact, the Assis tant Secretary’s conclusions of law were not fully
supported by the findings of fact; therefore the decision of the Assistant Secretary should be Reversed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision is Reversed.
Made and entered into this 8th day of April 2004.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
25
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
26
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessment of Unauthorized )
Substance Tax dated September 17, 2003 )
by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 437
)
Marshall Neal Morris, )
Taxpayer
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Marshall Neal Morris
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on June 19,
2003, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a notice of proposed assessment was delivered to the Taxpayer by
leaving a copy of same at the Taxpayer’s residence located at 7811 Haverstraw Ct., Charlotte, NC 28212. The notice alleged that
during the 80 weeks prior to September 17, 2002, the Taxpayer was in unauthorized possession of 9,080 grams (20 pounds) of
marijuana, to which no tax stamps were affixed. The notice proposed an assessment comprised of excise tax in the amount of
$31,780.00, penalties totaling $12,712.00, and interest in the amount of $158.90, for a total proposed tax liability of $44,650.90.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On February 19, 2003,
Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed
assessment. On June 19, 2003, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together
with penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the
Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary and reviewed the final decision entered by the Assistant
Secretary in this matter.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole
record, the arguments presented, and the Assistant Secretary’s final decision, concludes that the record does not contain sufficient
evidence to determine that the Taxpayer possessed 9,080 grams on marijuana. The Board concludes that the findings of fact made by
the Assistant Secretary were not supported by competent evidence in the record as to the Taxpayer’s unauthorized possession of 9,080
grams of marijuana during the 80 weeks prior to September 17, 2002; that based upon the findings of fact, the Assistant Secretary’s
conclusions of law were not fully supported by the findings of fact regarding Taxpayer’s unauthorized possession of 9,080 grams of
marijuana during the 80 weeks prior to September 17, 2002. Thus, the Board deems it necessary to remand this matter to the Assistant
Secretary for a further proceeding to compute the specific grams of the unauthorized substance that the Taxpayer possessed on
September 17, 2002.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
27
THEREFORE, it is the decision of the Board to Remand this matter to the Assistant Secretary for a further proceeding.
Made and entered into the 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
28
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated September 21, 2001 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 438
)
Artellis Robert Owen, )
Taxpayer
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Artellis Robert Owen
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on March 19,
2002, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by R. Earl Smith, Enforcement Agent of the Unauthorized Substances Tax Division, assessing $8,134.00 tax, $3,253.60
penalty and $657.95 interest, for a total proposed liability of $12,045.55. The assessment alleged that on September 20, 2000, the
Taxpayer possessed 2,324 grams of marijuana that did not have the proper tax stamps affixed.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. Pursuant to N.C. Gen. Stat.
§ 105-260.1, Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the
proposed assessment. On March 19, 2002, the Assistant Secretary issued the final decision, which sustained the proposed tax
assessment together with penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final
decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on September 21, 2001, in the sum of $8,134.00
tax, $3,253.60 penalty and $657.95 interest, for a total proposed liability of $12,045.55, based on possession of 2,324 grams of
marijuana.
2. The Taxpayer made timely objection and application for a hearing.
3. On September 20, 2000, the Taxpayer was in constructive possession of 2,324 grams of marijuana.
4. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and that burden was not met.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
29
3. The Taxpayer had constructive possession of 2,324 grams of marijuana on September 20, 2000, and was therefore a dealer as
that term is defined in G.S. 105-113.106 (3).
4. A finding of “no probable cause” in District Court on the concomitant criminal charges is not binding on the administrative
review of the civil tax assessment.
5. The Taxpayer is liable for $8,134.00 tax, $3,253.60 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the as sessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax
assessment is presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption,
the Taxpayer must offer evidence to show that the assessment is not proper.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
30
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Additional )
Income Tax for the Taxable Year 2001 )
By the Secretary of Revenue of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 439
)
Sabrina R. Haney, )
Taxpayer
THIS MATTER is before the Regular Tax Review Board (hereinafter “Regular Board”) upon petition for administrative
review filed by Sabrina R. Haney (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessment of additional individual income tax liability for taxable year 2001.
Pursuant to G.S. 105-241.1, an assessment proposing additional tax, penalty and accrued interest for taxable year 2001 was
mailed to the Taxpayer on October 8, 2002. The Taxpayer protested the assessment and filed a request for an administrative hearing.
After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on May 6, 2003, that sustained the proposed
assessment against the Taxpayer. Pursuant to G.S. 105-241.2, the Taxpayer filed a notice of intent and petition for administrative
review of the Assistant Secretary’s Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer’s petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayer’s petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer’s petition for administrative review be
and is hereby Dismissed.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Memb er
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
31
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Additional )
Income Tax for the Taxable Year 2001 )
By the Secretary of Revenue of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 440
)
James B. and Melanie A. Dunham, )
Taxpayer )
THIS MATTER is before the Regular Tax Review Board (hereinafter “Regular Board”) upon petition for administrative
review filed by James B. and Melanie A. Dunham (hereinafter "Taxpayers") regarding the Final Decision of Eugene J. Cella, Assistant
Secretary for Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the
proposed assessment of additional individual income tax liability for taxable year 2001.
Pursuant to G.S. 105-241.1, an assessment proposing additional tax, penalty and accrued interest for taxable year 2001 was
mailed to the Taxpayers on October 15, 2002. The Taxpayers protested the assessment and filed a request for an administrative
hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on June 10, 2003, that sustained the
proposed assessment against the Taxpayers. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and petition for
administrative review of the Assistant Secretary’s Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayers’ petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayers’ petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer’s petition for administrative review be
and is hereby Dismissed.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
32
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Additional )
Income Tax for the Taxable Year 1999, 2000, 2001 )
by the Secretary of Revenue of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 441
)
Mark A. Aneuber, )
Taxpayer )
THIS MATTER is before the Regular Tax Review Board (hereinafter “Regular Board”) upon petition for administrative
review filed by Mark A. Aneuber (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessments of additional individual income tax liability for taxable years 1999, 2000, and 2001.
Pursuant to G.S. 105-241.1, assessments proposing additional tax, penalty and accrued interest for taxable years 1999, 2000,
and 2001 were mailed to the Taxpayer on November 19, 2002, November 5, 2002, and June 25, 2002. The Taxpayer protested the
assessments and filed a request for an administrative hearing. After conducting a hearing, the Assistant Secretary of Revenue entered
a Final Decision, on June 11, 2003, that sustained the proposed assessments against the Taxpayer. Pursuant to G.S. 105-241.2, the
Taxpayer filed a notice of intent and petition for administrative review of the Assistant Secretary’s Final Decision with the Tax Review
Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer’s petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxp ayer’s petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer’s petition for administrative review be
and is hereby Dismissed.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
33
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated July 26, 2002 by the )
Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 442
)
Terry Eugene Woods, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Tuesday, April 13, 2004 pursuant to the petition of Terry Eugene Woods
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on July 21,
2003, sustaining a proposed assessment of unauthorized substance tax dated July 26, 2002.
Pursuant to N. C. Gen. Stat. § 105-113.111 and N. C. Gen. Stat. § 105-241.1(a) and (b), a notice of proposed assessment was
delivered to the Taxpayer by U.S. Mail at his last known address of 3409 Corbett Road, Mebane, NC 27203. The assessment alleged
that on July 16, 2002, the Taxpayer was in unauthorized possession of 624.9 grams of cocaine and 4,606.7 grams of marijuana on July
16, 2002, to which no tax stamps were affixed. The notice proposed an assessment comprised of excise tax in the amount of
$47,347.50, penalties totaling $18,949.80, and interest in the amount of $236.87.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On April 17, 2003, Eugene
J. Cella, Assistant Secretary of Revenue, conducted a hearing upon Taxpayer’s timely application and objection to the proposed
assessment. On July 21, 2003, the Assistant Secretary issued the final decision that sustained the assessment based upon the
possession of 612.8 grams of cocaine and 4,466.5 grams of marijuana. Thus, the final decision adjusted the assessment to an excise
tax liability in the amount of $46,284.50, penalties totaling $18,513.80, and interest until date of full payment. Thereafter, the
Taxpayer filed a petition for administrative review of the final decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of cocaine and marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. On July 26, 2002, an assessment of unauthorized substance tax was made against the Taxpayer comprised of excise tax in the
amount of $47,347.50, penalties totaling $18,949.80, and interest in the amount of $236.87, based upon the Taxpayer’s
possession of 624.9 grams of cocaine and 4,606.7 grams of marijuana. Notice of said assessment was delivered to the
Taxpayer by U.S. Mail.
2. Upon being assessed, and in a timely manner, the Taxpayer requested in writing an administrative tax hearing.
3. According to the SBI lab report the substances at issue are cocaine weighing 612.8 grams and marijuana weighing 4,466.5
grams.
4. Neither the Taxpayer nor anyone representing the Taxpayer submitted any arguments or evidence that would tend to
contradict the assessment.
5. On July 16, 2002, the Taxpayer possessed 612.8 grams of cocaine and 4,466.5 grams of marijuana.
6. No tax stamps were purchased for or affixed to the marijuana and cocaine as required by law.
CONCLUSIONS OF LAW
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
34
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. Based on the foregoing findings of fact, which are supported by a preponderance of the evidence, an assessment of
unauthorized substance tax against the Taxpayer is appropriate.
2. Without authorization, the Taxpayer had constructive possession of 612.8 grams of cocaine and 4,466.5 grams of marijuana
on July 16, 2002, and was therefore a “dealer” as that term is defined in N.C.G.S. 105-113.106(3).
3. The Taxpayer is liable for excise tax in the amount of $46,284.50, penalties totaling $18,513.80, and interest until date of full
payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
taxpayer to rebut that presumption. In order to rebut the presumption, the taxpayer must offer evidence to show that the assessment is
not correct. It is the function of this Board, upon administrative review, to review the record and determine whether the final decision
is proper based upon the evidence presented at the hearing before the A ssistant Secretary.
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole
record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were supported
by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were fully
supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
35
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Sales and Use )
Tax for the period January 1, 1997 through September 30, )
2000, by the Secretary of Revenue of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 443
)
Old Man Precision Automotive, Inc., )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Tuesday, April 13, 2004, upon a petition filed by Old Man Precision
Automotive, Inc. (hereafter “Taxpayer”) for administrative review of the Final Decision of the Assistant Secretary of Revenue entered
on April 2, 2002, sustaining the sales and use tax assessment imposed against the Taxpayer for the period of January 1, 1997 through
September 30, 2000, per the notice of amended sales and use tax assessment, dated March 19, 2002.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with ex officio member Jo Anne Sanford, Chair,
Utilities Commission and duly appointed member, Noel L. Allen, Attorney at Law participating.
ISSUE
The issues considered by the Board on review of this matter are stated as follows:
1. Is the amount of the assessment correct?
2. Was the Taxpayer “engaged in business” as a retailer in North Carolina and liable for collecting sales or use tax on the sales
of automotive parts to customers in this State?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. The Taxpayer sold complete automobile racing transmissions during the audit period.
2. The Taxpayer primarily received orders from customers in North Carolina for specialty transmissions that were used by
customers in automobile races.
3. The Taxpayer purchased complete transmissions and transmission parts exempt from sales or use tax in New York.
4. When the Taxpayer sold transmissions in North Carolina, it shipped complete transmissions and/or transmission parts to
transmission builders (subcontractors) in North Carolina who assembled or modified the transmissions to meet the
customers’ specifications.
5. The Taxpayer had ownership of property (stock transmissions and parts) consigned to its subcontractors for assembly, repair,
or modification in this State throughout the audit period. The property held by the subcontractors for and on behalf of the
Taxpayer is construed as inventory the Taxpayer stored temporarily, directly, or indirectly at locations for distribution in this
State.
6. One of the Taxpayer’s subcontractors is Progear, a proprietorship operated by Kenneth C. Bainbridge, son of Kenneth A.
Bainbridge, the Taxpayer’s corporate president.
7. After the subcontractors finished their work, the completed transmissions were distributed from their locations. The
customers either picked up the transmissions at the subcontractors’ places of business or the subcontractors delivered the
transmissions to the customers’ locations.
8. The Taxpayer mailed invoices from its New York location to customers who had taken delivery of the completed
transmissions in North Carolina from the Taxpayer’s subcontractors .
9. The Taxpayer did not charge, collect or remit North Carolina State or local sales or use tax on invoices issued to customers in
North Carolina during the audit period.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
36
10. The customers mailed their payments directly to the Taxpayer in New York.
11. The Department assessed tax on the Taxpayer’s sales of transmissions to customers in North Carolina.
12. The Notice of Proposed assessment was mailed to the Taxpayer on November 7, 2000.
13. The Taxpayer notified the Department that it objected to the assessment on December 5, 2000 and timely requested a hearing.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law made by the Assistant Secretary in his decision
regarding this matter:
1. The Taxpayer was, at all material times, a retailer engaged in the business of making retail sales of tangible personal property
subject to sales or use tax.
2. The Taxpayer’s North Carolina subcontractors, including Progear, acted as the Taxpayer’s representatives by delivering
property on behalf of the Taxpayer that it had agreed to sell to customers in North Carolina. Therefore, the Taxpayer’s
subcontractors/representatives “transacted business” on its behalf in this State within the purview of G.S. 105-164.8(b)(3).
3. Whereas the Taxpayer’s representatives transacted business on its behalf in North Carolina; the Taxpayer held inventory
stored at its subcontractors’ locations which functioned as temporary storage places in this State; and the Taxpayer’s
subcontractors delivered transmissions sold to customers from the subcontractors’ locations functioning as places of
distribution for the Taxpayer in this State; the Taxpayer was “engaged in business” in North Carolina within G.S. 105-
164.3(5).
4. The general rate of state tax and the applicable local tax is due on the Taxpayer’s sales of transmissions delivered by its
representatives to customers in North Carolina under G.S. 105-164.4.
5. The additional tax assessed is presumed to be correct under G.S. 105-241.1(a), and the burden is upon the Taxpayer to
overcome the presumption of correctness.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper.
Having reviewed the record, the Board determines that there is sufficient evidence to show that the Taxpayer was engaged in the
business of making retail sales of racecar transmissions during the period at issue. Thus, the Board concludes that the Taxp ayer failed
to furnish evidence to show that the assessment is not proper. The Board, after conducting an administrative hearing in this matter,
and after considering the petition, the brief, the whole record and the Assistant Secretary’s final decision, concludes that the findings
of fact made by the Assistant Secretary were supported by competent evidence in the record; that based upon the findings of fact, the
Assistant Secretary’s conclusions of law were fully supported by the findings of fact; therefore the decision of the Assistant Secretary
should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
PROPOSED RULES
19:01 NORTH CAROLINA REGISTER July 1, 2004
37
Note from the Codifier: The notices published in this Section of the NC Register include the text of proposed rules. The agency
must accept comments on the proposed rule(s) for at least 60 days from the publication date, or until the public hearing, or a
later date if specified in the notice by the agency. If the agency adopts a rule that differs substantially from a prior published
notice, the agency must publish the text of the proposed different rule and accept comment on the proposed different rule for 60
days.
Statutory reference: G.S. 150B-21.2.
TITLE 01 – DEPARTMENT OF ADMINISTRATION
Notice is hereby given in accordance with G.S. 150B-21.2 that
the State Building Commission intends to amend the rule cited
as 01 NCAC 30D .0302.
Proposed Effective Date: November 1, 2004
Public Hearing:
Date: July 27, 2004
Time: 12:30 p.m. – 1:30 p.m.
Location: New Education Building, 301 North Wilmington
Street, Main Level Conference Room (behind Receptionist),
Raleigh, NC
Reason for Proposed Action: This amendment was adopted by
the State Building Commission in March 2004.
Procedure by which a person can object to the agency on a
proposed rule: Written objections may be submitted to the
Director of the State Construction Office. Objections will be
received by mail, delivery service, hand delivery or facsimile
transmission. Objections may be directed to: Speros Fleggas,
Director, NC State Construction Office, MSC 1307, Raleigh, NC
27699-1307. Fax (919)807-4110.
Written comments may be submitted to: Speros Fleggas,
Director, State Construction Office, 1307 Mail Service Center,
Raleigh NC 27699-1309, Phone (919)807-4100, Fax (919)807-
4110, Email speros.fleggas@ncmail.net.
Comment period ends: August 30, 2004
Procedure for Subjecting a Proposed Rule to Legislative
Review: Any person who objects to the adoption of a permanent
rule may submit written comments to the agency. A person may
also submit written objections to the Rules Review Commission.
If the Rules Review Commission receives written and signed
objections in accordance with G.S. 150B-21.3(b2) from 10 or
more persons clearly requesting review by the legislature and the
Rules Review Commission approves the rule, the rule will
become effective as provided in G.S. 150B-21.3(b1). The
Commission will receive written objections until 5:00 p.m. on
the 6th business day preceding the end of the month in which a
rule is approved. The Commission will receive those objections
by mail, delivery service, hand delivery, or facsimile
transmission. If you have any further questions concerning the
submission of objections to the Commission, please call a
Commission staff attorney at 919-733-2721.
Fiscal Impact
State
Local
Substantive (>$3,000,000)
None
SUBCHAPTER 30D - STATE BUILDING COMMISSION
DESIGNER AND CONSULTANT SELECTION POLICY
SECTION .0300 - SELECTION OF DESIGNERS
OR CONSULTANTS
01 NCAC 30D .0302 PRE-SELECTION
A pre-selection committee shall be established for all projects
requiring professional service. On minor projects the pre-selection
committee shall consist of at least the Capital Projects
Coordinator, a representative of the using agency and one
representative from the State Construction Office. On major
projects the pre-selection committee shall consist of at least the
Capital Projects Coordinator, a representative of the using
agency and two representatives from the State Construction
Office. At least one member of all pre-selection committees
shall be a licensed design professional.
(1) General Procedure for All Projects: The
Capital Projects Coordinator shall review with
the using agency the requirements of the
project. This step should normally take place
prior to public advertisement in the Purchase
Directory, because designers and consultants
have a significant need to know in advance the
program intent of a project in order to
demonstrate their qualifications for the project
in their letter of interest. The Capital Projects
Coordinator shall receive all letters of interest
and other qualification information either
directly or from the designated contact person.
After a pre-selection priority list is prepared,
the list will remain confidential except to the
Secretary of the SBC. If fewer than three
letters of interest are received on major
projects, the project will be readvertised in the
Purchase Directory. If fewer than three letters
of interest are received following the re-advertisement,
the Capital Projects
Coordinator may proceed with the selection
process using the data received or may
advertise again.
(2) Special Procedures for Minor Projects: The
Capital Projects Coordinator shall again
review with the using agency the requirements
of the project and the qualifications of all firms
expressing interest in a specific project. The
PROPOSED RULES
19:01 NORTH CAROLINA REGISTER July 1, 2004
38
Capital Projects Coordinator and a
representative of the using agency shall meet
with the representative from the State
Construction Office for the evaluation of each
firm and development of a list of three firms in
priority order to be presented to the SBC. The
Capital Projects Coordinator may institute the
interview procedures, under major projects,
where special circumstances dictate such need.
The Capital Projects Coordinator shall submit
to the Secretary of the SBC the list of three
firms in priority order, including pre-selection
information and written recommendations, to
be presented to the SBC. The Capital Projects
Coordinator shall state in the submission to the
SBC that the established rules for public
announcement and pre-selection have been
followed or shall state full particulars if
exceptions have been taken.
(3) Special Procedures for Major Projects: The
pre-selection committee shall review the
requirements of a specific project and the
qualification of all firms expressing interest in
that project and shall select from that list not
more than six nor less than three firms to be
interviewed and evaluated. The pre-selection
committee shall interview each of the selected
firms, evaluate each firm interviewed, and
rank in order three firms. The Capital Projects
Coordinator shall state in his submission that
the established rules for public announcement
and pre-selection have been followed or shall
state full particulars if exceptions have been
taken.
(4) Special Procedures for Emergency Projects:
On occasion, emergency design or
consultation services may be required for
restoration or correction of a facility condition
which by its nature poses a significant hazard
to persons or property, or when an emergency
exists. Should this situation occur, in all
likelihood there will not be sufficient time to
follow the normal procedures described herein.
The Capital Projects Coordinator on these rare
occasions is authorized to declare an
emergency, notify the State Construction
Office and then obtain the services of a
competent designer or consultant for
consultation or design of the corrective action.
In all cases, such uses of these emergency
powers will involve a written description of
the condition and rationale for employing this
special authority signed by the head of the
agency and presented to the SBC at its next
normal meeting. Timeliness for obligation of
funds or other non-hazardous or non-emergency
situations do not constitute
sufficient grounds for invoking this special
authority.
(5) Annual Contract: A Funded Agency or a
Using Agency may require the services of
designer(s) or consultant(s) for small
miscellaneous projects on a routine basis. In
such cases, designer(s) or consultant(s) for
annual contracts will be selected in accordance
with the above procedures for minor projects.
In addition, no annual contract fee will exceed
One Hundred Fifty Thousand Dollars
($50,000.00) ($150,000) in total volume and
no single fee shall exceed Ten Thirty Six
Thousand Dollars ($10,000). ($36,000).
Annual contracts may be extended for one
additional year. However, if extended for an
additional one-year period, the designer may
not be selected for the next annual contract.
Total annual fees will not exceed One
Hundred Fifty Thousand Dollars ($50,000.00)
($150,000) for first year or One Three
Hundred Thousand Dollars ($100,000)
($300,000) for two-year period. If and when
these fees are used to limit, the agency must
readvertise.
(6) Special Procedures for Department of
Environment

NORTH CAROLINA
REGISTER
Volume 19, Issue 01
Pages 1 - 173
July 1, 2004
This issue contains documents officially filed
through June 10, 2004.
Office of Administrative Hearings
Rules Division
424 North Blount Street (27601)
6714 Mail Service Center
Raleigh, NC 27699-6714
(919) 733-2678
FAX (919) 733-3462
Julian Mann III, Director
Camille Winston, Deputy Director
Molly Masich, Director of APA Services
Linda Dupree, Editorial Assistant
Dana Sholes, Editorial Assistant
Julie Brincefield, Editorial Assistant
IN THIS ISSUE
I. EXECUTIVE ORDERS
Executive Order No. 59 .................................................1
II. IN ADDITION
Tax Review Board Decisions .....................................2 - 36
III. PROPOSED RULES
Administration
Office for Historically Underutilized Businesses......38 - 43
State Building Commission......................................37 - 38
Education
State Board of Education...........................................70 - 84
Environment and Natural Resources
Radiation Protection Commission...........................43 - 70
Licensing Boards
Pharmacy, Board of....................................................84 - 86
IV. APPROVED RULES ...................................................87 - 151
Agriculture
Food and Drug Protection Division
Markets
Plant Industry
Structural Pest Control Division
Commerce
Banking Commission
Cemetery Commission
Environment and Natural Resources
Environmental Health
Environmental Management
Parks & Recreation Area Rules
Wildlife Resources & Water Safety
Health and Human Services
Adult Health
Medical Care Commission
Mental Health, Community Facilities & Services
Mental Health, General
Public Health Programs, Procedures for
Justice
Private Protective Services
Licensing Boards
Pharmacy, Board of
Real Estate Commission
Transportation
Motor Vehicle, Division of
V. CONTESTED CASE DECISIONS
Index to ALJ Decisions.................................................152
Text of Selected Decisions
02 EDC 2310 ...............................................................153 - 173
For the CUMULATIVE INDEX to the NC Register go to:
http://oahnt.oah.state.nc.us/register/CI.pdf
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NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM
The North Carolina Administrative Code (NCAC) has four major classifications of rules. Three of these, titles, chapters, and sections are
mandatory. The major classification of the NCAC is the title. Each major department in the North Carolina executive branch of
government has been assigned a title number. Titles are further broken down into chapters which shall be numerical in order.
Subchapters are optional classifications to be used by agencies when appropriate.
NCAC TITLES TITLE 21
LICENSING BOARDS
TITLE 24
INDEPENDENT AGENCIES
1 ADMINISTRATION
2 AGRICULTURE & CONSUMER SERVICES
3 AUDITOR
4 COMMERCE
5 CORRECTION
6 COUNCIL OF STATE
7 CULTURAL RESOURCES
8 ELECTIONS
9 GOVERNOR
10A HEALTH AND HUMAN SERVICES
11 INSURANCE
12 JUSTICE
13 LABOR
14A CRIME CONTROL & PUBLIC SAFETY
15A ENVIRONMENT &NATURAL RESOURCES
16 PUBLIC EDUCATION
17 REVENUE
18 SECRETARY OF STATE
19A TRANSPORTATION
20 TREASURER
21* OCCUPATIONAL LICENSING BOARDS
22 ADMINISTRATIVE PROCEDURES
(REPEALED)
23 COMMUNITY COLLEGES
24* INDEPENDENT AGENCIES
25 STATE PERSONNEL
26 ADMINISTRATIVE HEARINGS
27 NC STATE BAR
28 JUVENILE JUSTICE AND DELINQUENCY
PREVENTION
1 Acupuncture
2 Architecture
3 Athletic Trainer Examiners
4 Auctioneers
6 Barber Examiners
8 Certified Public Accountant Examiners
10 Chiropractic Examiners
11 Employee Assistance Professionals
12 General Contractors
14 Cosmetic Art Examiners
16 Dental Examiners
17 Dietetics/Nutrition
18 Electrical Contractors
19 Electrolysis
20 Foresters
21 Geologists
22 Hearing Aid Dealers and Fitters
25 Interpreter/Transliterator (Reserved)
26 Landscape Architects
28 Landscape Contractors
29 Locksmith Licensing
30 Massage & Bodywork Therapy
31 Marital and Family Therapy
32 Medical Examiners
33 Midwifery Joint Committee
34 Funeral Service
36 Nursing
37 Nursing Home Administrators
38 Occupational Therapists
40 Opticians
42 Optometry
44 Osteopathic Examination (Repealed)
45 Pastoral Counselors, Fee-Based Practicing
46 Pharmacy
48 Physical Therapy Examiners
50 Plumbing, Heating & Fire Sprinkler
Contract ors
52 Podiatry Examiners
53 Professional Counselors
54 Psychology
56 Professional Engineers & Land Surveyors
57 Real Estate Appraisal
58 Real Estate Commission
60 Refrigeration Examiners
61 Respiratory Care
62 Sanitarian Examiners
63 Social Work Certification
64 Speech & Language Pathologists &
Audiologists
65 Therapeutic Recreation Certification
66 Veterinary Medical
68 Substance Abuse Professionals
69 Soil Scientists
1 Housing Finance
2 Agricultural Finance Authority
3 Safety & Health Review
Board
4 Reserved
5 State Health Plan Purchasing
Alliance Board
Note: Title 21 contains the chapters of the various occupational licensing boards and Title 24 contains the chapters of independent agencies.
NORTH CAROLINA REGISTER
Publication Schedule for January 2004 – December 2004
FILING DEADLINES NOTICE OF TEXT PERMANENT RULE TEMPORARY
RULES
Volume &
issue
number
Issue date Last day
for filing
Earliest date for
public hearing
End of required
comment
period
Deadline to submit
to RRC
for review at
next meeting
Earliest Eff.
Date of
Permanent Rule
Delayed Eff. Date of
Permanent Rule
(first legislative
day of the next
regular session)
270th day from publication
in the Register
18:13 01/02/04 12/08/03 01/17/04 03/02/04 03/22/04 05/01/04 05/10/04 09/28/04
18:14 01/15/04 12/19/03 01/30/04 03/15/04 03/22/04 05/01/04 05/10/04 10/11/04
18:15 02/02/04 01/09/04 02/17/04 04/02/04 04/20/04 06/01/04 01/26/05 10/29/04
18:16 02/16/04 01/26/04 03/02/04 04/16/04 04/20/04 06/01/04 01/26/05 11/12/04
18:17 03/01/04 02/09/04 03/16/04 04/30/04 05/20/04 07/01/04 01/26/05 11/26/04
18:18 03/15/04 02/23/04 03/30/04 05/14/04 05/20/04 07/01/04 01/26/05 12/10/04
18:19 04/01/04 03/11/04 04/16/04 06/01/04 06/21/04 08/01/04 01/26/05 12/27/04
18:20 04/15/04 03/24/04 04/30/04 06/14/04 06/21/04 08/01/04 01/26/05 01/10/05
18:21 05/03/04 04/12/04 05/18/04 07/02/04 07/20/04 09/01/04 01/26/05 01/28/05
18:22 05/17/04 04/26/04 06/01/04 07/16/04 07/20/04 09/01/04 01/26/05 02/11/05
18:23 06/01/04 05/10/04 06/16/04 08/02/04 08/20/04 10/01/04 01/26/05 02/26/05
18:24 06/15/04 05/24/04 06/30/04 08/16/04 08/20/04 10/01/04 01/26/05 03/12/05
19:01 07/01/04 06/10/04 07/16/04 08/30/04 09/20/04 11/01/04 01/26/05 03/28/05
19:02 07/15/04 06/23/04 07/30/04 09/13/04 09/20/04 11/01/04 01/26/05 04/11/05
19:03 08/02/04 07/12/04 08/17/04 10/01/04 10/20/04 12/01/04 01/26/05 04/29/05
19:04 08/16/04 07/26/04 08/31/04 10/15/04 10/20/04 12/01/04 01/26/05 05/13/05
19:05 09/01/04 08/11/04 09/16/04 11/01/04 11/22/04 01/01/05 01/26/05 05/29/05
19:06 09/15/04 08/24/04 09/30/04 11/15/04 11/22/04 01/01/05 01/26/05 06/12/05
19:07 10/01/04 09/10/24 10/16/04 11/30/04 12/20/04 02/01/05 05/00/06 06/28/05
19:08 10/15/04 09/24/04 10/30/04 12/14/04 12/20/04 02/01/05 05/00/06 07/12/05
19:09 11/01/04 10/11/04 11/16/04 12/31/04 01/20/05 03/01/05 05/00/06 07/29/05
19:10 11/15/04 10/22//04 11/30/04 01/14/05 01/20/05 03/01/05 05/00/06 08/12/05
19:11 12/01/04 11/05/04 12/16/04 01/31/05 02/21/05 04/01/05 05/00/06 08/28/05
19:12 12/15/04 11/22/04 12/30/04 02/14/05 02/21/05 04/01/05 05/00/06 09/11/05
EXPLANATION OF THE PUBLICATION SCHEDULE
This Publication Schedule is prepared by the Office of Administrative Hearings as a public service and the computation of time periods are not to be deemed binding or controlling.
Time is computed according to 26 NCAC 2C .0302 and the Rules of Civil Procedure, Rule 6.
GENERAL
The North Carolina Register shall be published twice
a month and contains the following information
submitted for publication by a state agency:
(1) temporary rules;
(2) notices of rule-making proceedings;
(3) text of proposed rules;
(4) text of permanent rules approved by the Rules
Review Commission;
(5) notices of receipt of a petition for municipal
incorporation, as required by G.S. 120-165;
(6) Executive Orders of the Governor;
(7) final decision letters from the U.S. Attorney
General concerning changes in laws affecting
voting in a jurisdiction subject of Section 5 of
the Voting Rights Act of 1965, as required by
G.S. 120-30.9H;
(8) orders of the Tax Review Board issued under
G.S. 105-241.2; and
(9) other information the Codifier of Rules
determines to be helpful to the public.
COMPUTING TIME: In computing time in the
schedule, the day of publication of the North Carolina
Register is not included. The last day of the period so
computed is included, unless it is a Saturday, Sunday,
or State holiday, in which event the period runs until
the preceding day which is not a Saturday, Sunday, or
State holiday.
FILING DEADLINES
ISSUE DATE: The Register is published on the first
and fifteen of each month if the first or fifteenth of
the month is not a Saturday, Sunday, or State holiday
for employees mandated by the State Personnel
Commission. If the first or fifteenth of any month is
a Saturday, Sunday, or a holiday for State employees,
the North Carolina Register issue for that day will be
published on the day of that month after the first or
fifteenth that is not a Saturday, Sunday, or holiday for
State employees.
LAST DAY FOR FILING: The last day for filing for any
issue is 15 days before the issue date excluding
Saturdays, Sundays, and holidays for State
employees.
NOTICE OF TEXT
EARLIEST DATE FOR PUBLIC HEARING: The hearing
date shall be at least 15 days after the date a notice of
the hearing is published.
END OF REQUIRED COMMENT PERIOD
An agency shall accept comments on the text of a
proposed rule for at least 60 days after the text is
published or until the date of any public hearings held
on the proposed rule, whichever is longer.
DEADLINE TO SUBMIT TO THE RULES REVIEW
COMMISSION: The Commission shall review a rule
submitted to it on or before the twentieth of a month
by the last day of the next month.
FIRST LEGISLATIVE DAY OF THE NEXT REGULAR
SESSION OF THE GENERAL ASSEMBLY: This date is
the first legislative day of the next regular session of
the General Assembly following approval of the rule
by the Rules Review Commission. See G.S. 150B-
21.3, Effective date of rules.
EXECUTIVE ORDERS
19:01 NORTH CAROLINA REGISTER July 1, 2004
1
EXECUTIVE ORDER NO. 59
PROCLAMATION OF STATE OF DISASTER FOR THE TOWNS OF
BOLTON, LAKE WACCAMAW, CHADBOURN, TABOR CITY AND
FAIR BLUFF AND THE CITY OF WHITEVILLE
WHEREAS, I have determined that a State of Disaster and State of Emergency, as defined in N.C.G.S. §§ 166A-4 and
14.288.1(10), exists in the State of North Carolina, specifically in the Towns of Bolton, Lake Waccamaw, Chadbourn, Tabor City, and
Fair Bluff and the City of Whiteville as a result of the January 26-27, 2004, ice storm.
WHEREAS, on January 26 and 27, 2004, the Towns of Bolton, Lake Waccamaw, Chadbourn, Tabor City, and Fair Bluff and
the City of Whiteville proclaimed a local State of Emergency;
WHEREAS, pursuant to N.C.G.S. § 166A-6, the criteria of Type I disaster are met including the following: 1) Receipt of the
preliminary damage assessment from the Secretary of Crime Control and Public Safety; 2) The Towns of Bolton, Lake Waccamaw,
Chadbourn, Tabor City and Fair Bluff and the City of Whiteville declared a local state of emergency pursuant to N.C.G.S. § 166A-8
and N.C.G.S. §§ 14-288.12, 14-288.13 and 14-288.14, and forwarded a written copy of the declaration to the Governor; 3) The
preliminary damage assessment meets or exceeds the criteria established for the Small Business Disaster Loan Program pursuant to 13
C.F.R. Part 123, or meets or exceeds the State infrastructure criteria set out in N.C.G.S. § 166A-6.01(b)(2)a; and, 4) A major disaster
declaration by the President of the United States pursuant to the Stafford Act has not been declared; and
NOW THEREFORE, pursuant to the authority vested in me as Governor by the Constitution and the laws of the State of
North Carolina, IT IS ORDERED:
Section 1. Pursuant to N.C.G.S. §§ 166A-6 and 14-288.15, a State of Disaster and State of Emergency is hereby
declared for the Towns of Bolton, Lake Waccamaw, Chadbourn, Tabor City and Fair Bluff and the City of Whiteville. Brunswick
Electric Membership Corporation in Columbus County and Four County Electric Membership Corporation in Bladen and Columbus
Counties are eligible entities, for purposes of reimbursement, as defined by N.C.G.S. § 166A -4(3).
Section 2. State and local government entities and agencies are hereby ordered to cooperate in the implementation of
the provisions of this proclamation and the provisions of the North Carolina Emergency Operations Plan.
Section 3. Bryan E. Beatty, Secretary of Crime Control and Public Safety and/or his designee, is hereby delegated all
power and authority granted to me and required of me by Chapter 166A and Article 36A of Chapter 14 of the General Statutes for the
purpose of implementing the said Emergency Operations Plan and to take such further action as is necessary to promote and secure the
safety and protection of the populace in the above-referenced City.
Section 4. Further, Bryan E. Beatty, Secretary of Crime Control and Public Safety, as chief coordinating officer of the
State of North Carolina, shall exercise the powers prescribed in N.C.G.S. § 143B-476.
Section 5. I authorize this proclamation: (a) to be distributed to the news media and other organizations calculated to
bring its contents to the attention of the general public; (b) unless the circumstances of the state of disaster prevent or impede, to be
promptly filed with the Secretary of Crime Control and Public Safety, the Secretary of State, and the clerks of superior court in the
counties to which it applies; and (c) to be distributed to others as necessary to assure proper implementation of this proclamation.
Section 6 The Type I disaster declaration shall expire 30 days after the issuance of the state of disaster and state of
emergency and Type I disaster proclamation for the Towns of Bolton, Lake Waccamaw, Chadbourn, Tabor City and Fair Bluff and
the City of Whiteville, issued on June 1, 2004, unless renewed by the Governor or the General Assembly. Such renewals may be
made in increments of 30 days each, not to exceed a total of 120 days from the date for first issuance. The Joint Legislative
Commission on Governmental Operations shall be notified prior to the issuance of any renewal of a Type I disaster declaration.
Done in the Capital City of Raleigh, North Carolina this the 1st day of June, 2004.
___________________________________
MICHAEL F. EASLEY
GOVERNOR
ATTEST:
___________________________________
ELAINE MARSHALL
SECRETARY OF STATE
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
2
Note from the Codifier: This Section contains public notices that are required to be published in the Register or have been
approved by the Codifier of Rules for publication.
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Additional )
Sales and Use Tax for the period of )
January 1, 1994, through November 30, )
1996 by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 426
)
Vanderbilt Mortgage & Finance, Incorporated )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, on Friday, September 26, 2003, upon a petition filed by Vanderbilt Mortgage & Finance, Incorporated (hereafter
“Taxpayer”) for administrative review of the Final Decision of the Assistant Secretary of Revenue entered on July 11, 2002,
sustaining the sales and use tax assessment imposed against the Taxpayer for the period of August 1, 1995 through June 30, 2001.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with ex officio member Jo Anne Sanford, Chair,
Utilities Commission and duly appointed member, Noel L. Allen, Attorney at Law participating.
STATEMENT OF FACTS
The Taxpayer is a corporation engaged primarily in the business of financing of manufactured homes. The Taxpayer also
sells manufactured homes that are repossessed upon default of the buyers. The homes financed are either sold by independent
manufactured home dealers or by a related company’s manufactured home dealer. The homes sold on independent dealer sales lots
were sold under no-recourse agreements and those sold by a related company dealer sales lot were sold pursuant to full recourse
agreements.
On July 31, 2001, auditors with the Department of Revenue completed an examination of the Taxpayer’s records and
proposed to assess additional tax, penalty, and interest. The additional tax resulted from the Taxpayer’s sales of no-recourse
repossessed manufactured homes. The Taxpayer did not charge, collect or remit said tax on these taxable repossessed manufactured
homes. The Taxpayer objected to the assessment and timely requested a hearing before the Secretary of Revenue. On July 11, 2002,
the Assistant Secretary issued his final decision that sustained the assessment of tax, penalty and interest against the Taxpayer for the
period at issue. Pursuant to N.C. Gen. Stat. § 105-241.2, Taxpayer timely filed a notice of intent and petition for administrative review
of the Assistant Secretary’s Final Decision with the Tax Review Board.
ISSUE
The issues considered by the Board on review of this matter are stated as follows:
1. Are the Taxpayer’s sales of the no-recourse repossessed manufactured homes subject to the 2% State sales or use tax with a
maximum tax of $300.00 per article?
2. Does the fact that some repossessed manufactured homes are taxable and some are not taxable, based on the fact that some
were originally sold under no-recourse agreements and other under recourse agreements, mean that all repossessed
manufactured homes should be non-taxable so as to present uniform fairness to the consumer?
3. Does the prior Installment Paper Dealer tax audit of the Taxpayer conducted by the Field Operations Division constitute
“erroneous written advice” pursuant to G.S. 105-264 by the Department and preclude the assessment of the additional sales
and use tax?
4. Is the Taxpayer making tax exempt “occasional or isolated” sales when no-recourse repossessed manufactured homes are
sold?
EVIDENCE
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
3
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Tax Review Board reviewed all the documents, records, data, evidence and
other materials that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the
documentation, that evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. The Taxpayer is primarily engaged in business as a financial organization; however the Taxpayer makes retail sales of no-recourse
manufactured homes, which have been repossessed.
2. The Taxpayer financed manufactured homes, which were sold either on independent dealer sales lots or on related company
sales lots (CMH Homes, Incorporated).
3. The homes sold on independent dealer sales lots were sold under a no-recourse agreement and those sold by a related
company dealer sales lot were sold pursuant to a full recourse agreement.
4. The Taxpayer has no-recourse against the independent selling dealer in the event of default by the original buyer of the
manufactured homes during the audit period.
5. The Taxpayer acquired ownership of the repossessed no-recourse manufactured homes at the time they were repossessed, due
to the default of the purchaser on their financing agreement with the Taxpayer.
6. The Department has assessed tax on the sale of the repossessed manufactured homes, which were originally sold under a no-recourse
agreement by independent dealer sales lots.
7. The Notice of Proposed assessment was mailed to the Taxpayer on August 15, 2001.
8. The Taxpayer notified the Department that it objected to the assessment on September 7, 2001 and timely requested a
hearing.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law made by the Assistant Secretary in his decision
regarding this matter:
1. G.S. 105-164.13(16) provides an exemption from sales tax provided the article is repossessed by the selling vendor and sales
tax was paid on the original sale of the article.
2. New, used and repossessed manufactured homes are offered for sale at various dealers lots; however, the taxable and non-taxable
sales tax status of the homes cannot be used to seek an exemption from sales tax by any retailer. Perfect equality in
the collection of the tax by retailers from consumers is, as a practical matter, impossible as between almost any two or more
retailers by reason of the differences in types of merchandise sold and selling methods, Fisher v. Jones, 15 N.C. App. 737,
190 S.E.2d 663 (1972).
3. The Department has no record of receipt of any written request from the Taxpayer for advice or written approval regarding
the Taxpayer's treatment of the sales tax liability on repossessed manufactured homes acquired and offered for sale. G.S.105-
83 “Installment paper dealers” is administered by the Corporate, Excise and Insurance Tax Division and the sales and use tax
assessment at issue is administered by the Sales and Use Tax Division. Therefore, the Department has not provided
erroneous sales tax advice and is not precluded from assessing sales tax against the Taxpayer due to a prior Installment Paper
Dealer audit for a prior period.
4. G.S. 105-164.3(1) cites no specific number of sales, which would constitute non-taxable “isolated or occasional sales”.
5. The Taxpayer's retail sales of $18,257,966.11 during the audit period do not constitute occasional or isolated sales.
6. The Taxpayer is a retailer making retail taxable sales under G.S. 105-164.3(13) and (14).
7. The Taxpayer is liable for the 2% State sales tax with a maximum of $300.00 per article on its sales of no-recourse
repossessed manufactured homes sold on independent dealer lots.
8. Notice of proposed assessment for the period August 1, 1995 through June 30, 2001 was properly issued pursuant to G.S.
105-241.1.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary.”
The Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concludes that the findings of fact made by the Assistant Secretary were
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
4
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 23rd day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
5
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated September 12, 2000 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 427
)
Celia Marie Morrison, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on December 10, 2003, pursuant to the petition of Celia Marie Morrison
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on November
16, 2001, and ruled that the Taxpayer was liable for an assessment in the sum of $11,350.00 and penalty in the sum of $4,540.00, plus
accrued interest.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by Enforcement Agent S. M. Brake of the Unauthorized Substances Tax Division, assessing $17,100.00 tax, $6,840.00
penalty and $114.00 interest, for a total proposed liability of $24,054.00. The assessment alleged that the Taxpayer had possessed
341.2 grams of cocaine without the proper tax stamps affixed. The Taxpayer protested the assessment and requested a hearing before
the Secretary of Revenue. On July 13, 2001, Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely
application and objection to the proposed assessment. On November 16, 2001, the Assistant Secretary issued the final decision, which
determined that the Taxpayer was liable for tax in the sum of $11,350.00 and penalty in the sum of $4,540.00, plus interest.
Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the Board.
ISSUES
1. Did the Taxpayer have actual and/or constructive possession of cocaine without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. On May 16, 2001, Secretary of Revenue E. Norris Tolson delegated to Assistant Secretary Eugene J. Cella the authority to
hold any hearing required or allowed under Chapter 105 of the General Statutes.
2. Assessment of Unauthorized Substance Tax was made against the Taxpayer on September 12, 2000, in the sum of
$17,100.00 tax, $6,840.00 penalty and $114.00 interest, for a total proposed liability of $24,054.00, based upon possession of
341.2 grams of cocaine.
3. The Taxpayer made timely objection and application for a hearing.
4. The one gram of cocaine the Taxpayer admitted to possessing in September 2000 represents a nontaxable quantity.
5. A clear preponderance of the evidence, namely the three sales of 30, 90 and 50 grams of cocaine in August 2000, shows that
the Taxpayer possessed cocaine in discrete quantities that exceeded the minimum taxable threshold of seven grams. No
evidence was introduced to contradict this finding.
6. There is insufficient evidence that the four ounces of cocaine the Taxpayer admitted to possessing in August 2000 had not
already been taxed pursuant to the three undercover buys of 30, 90 and 50 grams, which were separately assessed.
7. On September 8, 2000, the Taxpayer voluntarily signed a statement wherein she admitted possessing a total of eight ounces
(226.8 grams) of cocaine between January and July, 2000, and these quantities are subject to the unauthorized substance tax.
No evidence was introduced to contradict the officer’s testimony that the Taxpayer was not impaired at the time she gave the
statement.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
6
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome this presumption, and this burden was partially
met.
3. The Taxpayer possessed in discrete taxable quantities a total of eight ounces (226.8 grams) of cocaine between January and
July, 2000, and was therefore a dealer as that term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $11,350.00 and penalty in the sum of $4,540.00, plus accrued interest.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax
assessment is presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption,
the Taxpayer must offer evidence to show that the assessment is not proper.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into the 18th day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
7
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated May 8, 2001 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 428
)
David Paul Shelman, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on December 10, 2003, pursuant to the petition of David Paul Shelman
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on October 4,
2001, sustaining a proposed assessment of unauthorized substance tax dated May 8, 2001.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by J.L. Mozingo, Enforcement Agent of the Unauthorized Substances Tax Division, assessing $10,000.00 tax, $4,000.00
penalty and $66.67 interest, for a total proposed liability of $14,066.67. The assessment alleged that on April 30, 2001, the Taxpayer
possessed 2,000 dosages of methamphetamine without the proper tax stamps affixed.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. At the request of the
Taxpayer’s attorney, the hearing was conducted via written communication in lieu of a personal appearance. The record upon which
the Assistant Secretary based his decision was closed on September 3, 2001, for purposes of G.S. 105-241.1. On October 4, 2001, the
Assistant Secretary issued the final decision sustaining the proposed assessment. Thereafter, the Taxpayer timely filed a petition for
administrative review of the final decision with the Board.
ISSUES
1. Did the Taxpayer have actual and/or constructive possession of methamphetamine without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented for the Assistant Secretary to consider. Based upon the Board’s review of the documentation, that evidence
is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on May 8, 2001, in the sum of $10,000.00 tax,
$4,000.00 penalty and $66.67 interest, for a total proposed liability of $14,066.67, based on possession of 2,000 dosages of
methamphetamine.
2. The Taxpayer made timely objection and application for a hearing.
3. On April 30, 2001, the Taxpayer had actual possession of 2,000 dosages of methamphetamine.
4. No tax stamps were purchased for or affixed to the methamphetamine as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption of correctness, and that burden
was not met.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
8
3. The Taxpayer had unauthorized possession of 2,000 dosages of methamphetamine on April 30, 2001 and was therefore a
dealer as that term is defined in G.S. 105-113.106 (3).
4. The Taxpayer is liable for $10,000 tax, $4,000.00 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented to the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is
presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption, the taxpayer
must offer evidence to show that the assessment is not correct.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into the 18th day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
9
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Sales and Use )
Tax for the period February 1, 1997 through )
November 30 1999, by the Secretary of Revenue )
of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 429
)
Systel Business Equipment Company, Inc )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on December 10, 2003, pursuant to the petition of Systel Business Equipment
Company, Incorporated (hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of
Revenue on March 18, 2003, sustaining a proposed assessment of sales and use taxes for the period of February 1, 1997 through
November 30, 1999.
STATEMENT OF CASE
The Taxpayer is a corporation engaged in the business of selling, leasing and servicing office copying machines and other
office equipment. In 1999, the Department of Revenue audited the Taxpayer for the period of February 1, 1997 through November
30, 1999. On February 2, 2000, the Department of Revenue issued the Field Auditor’s Report reflecting the auditor’s determination of
taxes due. The Taxpayer submitted a written objection to the assessment and timely requested a hearing before the Secretary of
Revenue. After conducting a hearing, the Assistant Secretary of Revenue rendered a final decision on March 18, 2003 sustaining a
proposed assessment of sales and use taxes for the period of February 1, 1997 through November 30, 1999. Thereafter the Taxpayer
filed a timely notice of intent and petition for administrative review with the Board.
ISSUES
Whether the amounts received by the Taxpayer under its operational maintenance agreements are subject to sales taxes.
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, and evidence that the parties
presented at the hearing before the Assistant Secretary of Revenue and reviewed the final decision entered by the Assistant Secretary
of Revenue in this matter.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
The Taxpayer is engaged in the business of selling, leasing and servicing copying machines and other office machines and
equipment. The central issue in this matter is the application of tax to the transactions involving maintenance contracts for customers
that own copiers or lease copiers from a lessor other than the Taxpayer. The Ta xpayer collected and remitted sales tax on the fees it
charged its customers for optional maintenance agreements. The Department of Revenue argued at the hearing before the Assistant
Secretary that these arrangements did not constitute retail sales, and that the fees that the Taxpayer charged its customers for the
optional maintenance agreements were not taxable. Thus, the Department of Revenue alleged that the Taxpayer owed use tax on its
cost of any tangible personal property used to fulfill its optional maintenance agreements.
In the petition for administrative review of the final decision, and the memorandum in support thereto, the Taxpayer presents
its argument that it “sells” supplies and repair parts to customers holding maintenance contracts with its business. In the final
decision, the Assistant Secretary sustained the proposed assessment in this matter and concluded the Taxpayer was liable for “use”
taxes on the items under the maintenance contracts because the Taxpayer had consumed the items while providing nontaxable
services. In particular, the Assistant Secretary concluded that the fees charged by the Taxpayer under the optional maintenance
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
10
agreements do not constitute a sale of tangible personal property and are not subject to sales tax and that the parts and supplies used by
the Taxpayer to fulfill the optional maintenance agreements are subject to State and local use tax.
The Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
documents of record and the Assistant Secretary’s final decision, and having considered the arguments of counsel at the hearing,
concludes that the record does not contain sufficient evidence to confirm the final decision in this matter. Thus, the Board concludes
that the findings of fact made by the Assistant Secretary were not supported by competent evidence in the record; that based upon the
findings of fact, the Assistant Secretary’s conclusions of law were not fully supported by the findings of fact; therefore the decision of
the Assistant Secretary should not be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be and is hereby Reversed.
Made and entered into 9th day of March 2004.
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
Chairman Richard H. Moore did not participate in the decision regarding this matter.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
11
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated November 2, 2000 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 430
)
James Green Hamilton, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on December 10, 2003, pursuant to the petition of James Green Hamilton
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on October 30,
2001, sustaining a proposed assessment of unauthorized substance tax dated November 2, 2000.
Pursuant to G.S. § 105-113.111(a) and G.S. § 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to
the Taxpayer by Enforcement Agent Brian Zieverink, of the Unauthorized Substance Tax Division, assessing $700.00 tax, $280.00
penalty and $4.67 interest, for a total liability of $984.67. The assessment alleged that on October 18, 2000, the Taxpayer was in
unauthorized possession of 13 dosages of Adderall and 22 dosages of methadone. The Taxpayer protested the assessment and
requested a hearing before the Secretary of Revenue. On July 6, 2001, Eugene J. Cella, Assistant Secretary conducted a hearing upon
Taxpayer’s timely application and objection to the proposed assessment. On October 30, 2001, the Assistant Secretary issued the final
decision sustaining the proposed assessment. Thereafter, the Taxpayer timely filed a petition for administrative review of the final
decision with the Board.
ISSUES
1. Did the Taxpayer have actual and/or constructive possession of Adderall and methadone without the proper tax stamps
affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on November 2, 2000, in the sum of $700.00 tax,
$280.00 penalty and $4.67 interest, for a total liability of $984.67, based upon possession of 13 dosages of Adderall and 22
dosages of methadone.
2. The Taxpayer made timely objection and application for a hearing.
3. The Taxpayer did not obtain the Adderall and methadone in a legal manner; therefore the possession of the same is
unauthorized and subject to tax.
4. On October 18, 2000, the Taxpayer had constructive possession of 13 dosages of Adderall and 22 dosages of methadone
without the proper tax stamps affixed thereto.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and that burden was not met.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
12
3. On October 18, 2000, the Taxpayer possessed 13 dosages of Adderall and 22 dosages of methadone and was therefore a
dealer as that term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $700.00 tax, $280.00 penalty and accrued interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax
assessment is presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption,
the taxpayer must offer evidence to show that the assessment is not correct.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decis ion, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into 18th day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
Chair, Utilities Commission
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
13
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessments of Additional )
Income Tax for the Taxable Years 1991, )
and 1992 by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 431
)
Sydney N. Shepard, )
Taxpayer )
THIS MATTER is before the regular Tax Review Board (hereinafter “Board”) upon petition for administrative review filed
by Sydney N. Shepherd (hereinafter "Taxpayer") regarding the final decision of Eugene Cella, Assistant Secretary of Revenue
(hereinafter "Assistant Secretary"), entered on March 12, 2003, sustaining the proposed assessments of additional individual income
tax for taxable years 1991, and 1992.
Pursuant to G.S. 105-241.1, the Department of Revenue mailed the Taxpayer Notices of Individual Income Tax Assessments
proposing the assessments of additional income tax, plus penalties, and accrued interest for the taxable years of 1991 and 1992. The
Taxpayer objected to the assessments and filed a request for hearing. After conducting a hearing, the Assistant Secretary of Revenue
entered a final decision on March 12, 2003, sustaining the proposed assessments. Pursuant to G.S. 105-241.2, the Taxpayer filed a
notice of intent with the Board on April 11, 2003. On June 13, 2003, the Taxpayer filed a Petition to dismiss the State Tax Board
Action, an Objection to Policy and a Motion to extend time to seek competent counsel. On September 23, 2003, the Secretary of
Revenue filed a motion to dismiss this matter for failure of the Taxpayer to timely file the petition for administrative review with the
Tax Review Board. The Board has reviewed the Department of Revenue’s motion to dismiss the Taxpayer’s appeal.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, and the records and documents transmitted by the
Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer did not timely file the petition and
while it may be appropriate to grant the motion to dismiss; the Taxpayer’s petition is dismissed since the grounds and arguments upon
which relief is sought have been repeatedly deemed by the Courts to be lacking in legal merit. Thus, the Board concludes that
Taxpayer’s petition is frivolous and is filed for the purpose of delay.
IT IS THEREFORE ORDERED that the Taxpayer’s petition for review be and is hereby Dismissed.
Made and entered into 18th day of March 2004.
Signature_________________________________
Richard H. Moore, Chairman
Chair, Utilities Commission
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
14
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated August 2, 2002 )
by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 432
)
Daniel Joseph Watts, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Daniel Joseph Watts
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on July 17,
2003, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to N.C.G.S. 105-113.111 and N.C.G.S. 105-241.1(a)&(b), a notice of proposed assessment was served on the
Taxpayer in person by an Enforcement Agent with the Unauthorized Substances Tax Division. The notice alleged that on August 2,
2002, the Taxpayer was in unauthorized possession of 53,075 grams (117 pounds) of marijuana, to which no tax stamps were affixed.
The notice proposed an assessment comprised of excise tax in the amount of $185,762.50, penalties totaling $74,305.00, and interest
in the amount of $928.81, for a total proposed tax liability of $260,996.31.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On March 12, 2003,
Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed
assessment. On July 17, 2003, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together
with penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the
Board.
ISSUES
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Law enforcement had received complaints about the Taxpayer selling and storing large amounts of marijuana on his property.
2. On the evening of August 1, 2002, officers with the Robeson County Sheriff’s Office performed a search of the Taxpayer’s
property.
3. Prior to beginning the search, the Taxpayer appeared to the officers to be very nervous: He couldn't stand still and his hands
were shaking. Officers noted the Taxpayer’s nervousness increased noticeably as they approached an outbuilding on the
Taxpayer’s property.
4. When asked about the contents of the utility building, the Taxpayer told the officers that his wife had a tanning bed in the
outbuilding.
5. The outbuilding was locked. When requested by the officers, the Taxpayer opened the building with a silver key that he had
on his person.
6. A search of the outbuilding revealed 33 bundles of marijuana beneath a trapdoor and a tanning bed.
7. The Taxpayer had over $1,750.00 in cash on his person at the time he was arrested.
8. Also on the Taxpayer’s property, officers located a set of digital scales, a box of plastic bags, and vacuum-sealed bags that
had been torn open and contained marijuana residue. Officers also located several firearms and over $4,300.00 in cash in the
master bedroom and bathroom of the house on Taxpayer’s property.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
15
9. Using samples of green vegetable matter taken from each bundle, the SBI lab confirmed the material in each bundle was
marijuana.
10. The Taxpayer made the statement to investigators that if they had come three weeks later the marijuana would not have been
found since he was getting out of the business.
11. There is no evidence of law enforcement misconduct in the Taxpayer’s case.
12. On August 2, 2002, an assessment of unauthorized substance tax was made against the Taxpayer comprised of excise tax in
the amount of $185,762.50, penalties totaling $74,305.00, and interest in the amount of $928.81, for a total proposed tax
liability of $260,996.31, based upon the Taxpayer’s possession of 53,075 grams of marijuana. Notice of said assessment was
served on the Taxpayer in person.
13. Upon being assessed, and in a timely manner, the Taxpayer requested in writing an administrative tax hearing.
14. On August 2, 2002, the Taxpayer possessed 53,075 grams of marijuana.
15. The Taxpayer offered no evidence that any of the seized marijuana was harvested marijuana stems and stalks that had been
separated from and were not mixed with any other parts of the marijuana plant.
16. The Taxpayer has been arrested and convicted for possession of marijuana with intent to sell in the past.
17. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. A preponderance of the evidence supports the foregoing findings of fact; therefore the assessment of unauthorized substances
tax against the Taxpayer is concluded to be correct.
2. A proviso in a statute taxing certain possessions at a lower rate than that made applicable in general is a partial exemption
and is, therefore, to be strictly construed against the claim for such special or preferred treatment. Because the Taxpayer
presented no evidence that separated marijuana stems and stalks comprised a portion of the marijuana that he is being taxed
for possessing, the $.40 per gram rate is not applicable. The applicable tax rate is the $3.50 per grams rate generally
applicable to marijuana.
3. Without authorization, the Taxpayer constructively possessed 53,075 grams of marijuana on August 2, 2002, and was
therefore a “dealer” as that term is defined in N.C.G.S. 105-113.106(3).
4. N.C.G.S. 105-113.112 provides that any information obtained pursuant to the Unauthorized Substances Excise Tax Schedule
(N.C.G.S. 105-113.105 et seq.) is confidential and may not be disclosed or used in a criminal prosecution, unless that
information has been independently obtained by law enforcement officers. Thus, a taxpayer reporting possession of an
unauthorized substance for tax purposes does not incriminate himself as the tax itself is not a criminal but a civil matter, the
report may be made anonymously, and the report and any information obtained as a result of it cannot be disclosed by
Department employees to law enforcement for use in a criminal proceeding.
5. The United States Supreme Court has held that the exclusionary rule is not constitutionally mandated, but is a judicially
created means of deterring illegal searches and seizures. Where evidence is obtained in an allegedly illegal search in
furtherance of a criminal investigation, it is generally unlikely that application of the exclusionary rule to bar the evidence in
a secondary civil proceeding will deter future Fourth Amendment violations. Where, as in the instant unauthorized substance
excise tax assessment proceedings, the exclusion of evidence is unlikely to deter future Fourth Amendment violations by law
enforcement officers, the exclusionary rule does not apply, and evidence of possession of unauthorized substances found
pursuant to an allegedly unconstitutional search by law enforcement officers can be used by revenue authorities to make a tax
assessment.
6. The Taxpayer is liable for excise tax in the amount of $185,762.50, penalties totaling $74,305.00, and interest until date of
full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax
assessment is presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption,
the Taxpayer must offer evidence to show that the assessment is not proper.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
16
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
Chair, Utilities Commission
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
17
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated August 2, 2002 )
By the Secretary of Revenue )
) ADMINISTRATIVE DECISION
vs. ) Number: 433
)
Elizabeth Watts, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Elizabeth Watts
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on July 17,
2003, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to N.C.G.S. 105-113.111 and N.C.G.S. 105-241.1(a)&(b), a notice of proposed assessment was served on the
Taxpayer in person by an Enforcement Agent with the Unauthorized Substances Tax Division. The notice alleged that on August 2,
2002, the Taxpayer was in unauthorized possession of 53,075 grams (117 pounds) of marijuana, to which no tax stamps were affixed.
The notice proposed an assessment comprised of excise tax in the amount of $185,762.50, penalties totaling $74,305.00, and interest
in the amount of $928.81, for a total proposed tax liability of $260,996.31.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On March 12, 2003,
Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed
assessment. On July 17, 2003, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together
with penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the
Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Law enforcement had received complaints about the Taxpayer selling and storing large amounts of marijuana on her
property.
2. On the evening of August 1, 2002, officers with the Robeson County Sheriff’s Office performed a search of the Taxpayer’s
property.
3. Prior to beginning the search, the Taxpayer’s husband appeared to the officers to be very nervous: He couldn't stand still and
his hands were shaking. Officers noted the Taxpayer’s husband’s nervousness increased noticeably as they approached an
outbuilding on the Taxpayer’s property.
4. The Taxpayer was present on the property throughout the period of the search.
5. A search of the outbuilding revealed 33 bundles of marijuana beneath a trapdoor and a tanning bed that the Taxpayer’s
husband said was the Taxpayer’s.
6. Using samples of green vegetable matter taken from each bundle, the SBI lab confirmed the material in each bundle was
marijuana.
7. The Taxpayer’s husband made the statement to investigators that if they had come three weeks later the marijuana would not
have been found since he was getting out of the business.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
18
8. There is no evidence of law enforcement misconduct in the Taxpayer’s case.
9. On August 2, 2002, an assessment of unauthorized substance tax was made against the Taxpayer comprised of excise tax in
the amo unt of $185,762.50, penalties totaling $74,305.00, and interest in the amount of $928.81, for a total proposed tax
liability of $260,996.31, based upon the Taxpayer’s possession of 53,075 grams of marijuana. Notice of said assessment was
served on the Taxpayer in person.
10. Upon being assessed, and in a timely manner, the Taxpayer requested in writing an administrative tax hearing.
11. On August 2, 2002, the Taxpayer possessed 53,075 grams of marijuana.
12. The Taxpayer offered no evidence that any of the seized marijuana was harvested marijuana stems and stalks that had been
separated from and were not mixed with any other parts of the marijuana plant.
13. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. A preponderance of the evidence supports the foregoing findings of fact; therefore the assessment of unauthorized substances
tax against the Taxpayer is concluded to be correct.
2. A proviso in a statute taxing certain possessions at a lower rate than that made applicable in general is a partial exemption
and is, therefore, to be strictly construed against the claim for such special or preferred treatment. Because the Taxpayer
presented no evidence that separated marijuana stems and stalks comprised a portion of the marijuana that she is being taxed
for possessing, the $.40 per gram rate is not applicable. The applicable tax rate is the $3.50 per grams rate generally
applicable to marijuana.
3. Where, inter alia, such a large quantity of marijuana is found on the Taxpayer's property in close proximity to the house
located thereon, and where the Taxpayer's personal property (a tanning bed) is found in the same location as the seized
marijuana, and where large amounts of cash which cannot be explained by the Taxpayer are found within the house along
with several firearms, and where the Taxpayer is present when the marijuana is seized, and where the Taxpayer knew that her
husband had been convicted of possessing marijuana with intent to sell it in the past, it is permissible to infer that the
Taxpayer had constructive possession of the seized marijuana.
4. Without authorization, the Taxpayer constructively possessed 53,075 grams of marijuana on August 2, 2002, and was
therefore a “dealer” as that term is defined in N.C.G.S. 105-113.106(3).
5. N.C.G.S. 105-113.112 provides that any information obtained pursuant to the Unauthorized Substances Excise Tax Schedule
(N.C.G.S. 105-113.105 et seq.) is confidential and may not be disclosed or used in a criminal prosecution, unless that
information has been independently obtained by law enforcement officers. Thus, a taxpayer reporting possession of an
unauthorized substance for tax purposes does not incriminate herself as the tax itself is not a criminal but a civil matter, the
report may be made anonymously, and the report and any information obtained as a result of it cannot be disclosed by
Department employees to law enforcement for use in a criminal proceeding.
6. The United States Supreme Court has held that the exclusionary rule is not constitutionally mandated, but is a judicially
created means of deterring illegal searches and seizures. Where evidence is obtained in an allegedly illegal search in
furtherance of a criminal investigation, it is generally unlikely that application of the exclusionary rule to bar the evidence in
a secondary civil proceeding will deter future Fourth Amendment violations. Where, as in the instant unauthorized substance
excise tax assessment proceedings, the exclusion of evidence is unlikely to deter future Fourth Amendment violations by law
enforcement officers, the exclusionary rule does not apply, and evidence of possession of unauthorized substances found
pursuant to an allegedly unconstitutional search by law enforcement officers can be used by revenue authorities to make a tax
assessment.
7. The Taxpayer is liable for excise tax in the amount of $185,762.50, penalties totaling $74,305.00, and interest until date of
full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
taxpayer to rebut that presumption. In order to rebut the presumption, the Taxpayer must offer evidence to show that the assessment is
not proper. It is the function of this Board, upon administrative review, to review the record and determine whether the final decision
is proper based upon the evidence in the record. From a review of the record, the Board determines that the Taxpayer did not provide
sufficient evidence to show that the assessment is not proper.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
19
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
20
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated December 28, 2001 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 434
)
Anthony Jerome McClure, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Anthony Jerome
McClure (hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on
June 4, 2002, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by Enforcement Agent R. Earl Smith, of the Unauthorized Substances Tax Division, assessing $2,400.00 tax, $960.00
penalty and $16.00 interest, for a total proposed liability of $3,376.00. The assessment alleged that on November 30, 2001, the
Taxpayer was in unauthorized possession of 480 dosages of methamphetamine.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On April 3, 2002, Eugene
J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed assessment. On
June 4, 2002, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together with penalty and
interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of methamphetamine without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on December 28, 2001, in the sum of
$2,400.00 tax, $960.00 penalty and $16.00 interest, for a total proposed liability of $3,376.00, based upon possession of 480
dosages of methamphetamine.
2. The Taxpayer made timely objection and application for a hearing.
3. The Taxpayer’s knowledge and control of the contents of his property can be reasonably inferred, thus placing him in
constructive possession of the controlled substances found in his home and outbuilding.
4. On November 30, 2001, the Taxpayer had possession of 480 dosages of methamphetamine without proper tax stamps affixed
thereto.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and this burden was not met.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
21
3. On November 30, 2001, the Taxpayer had possession of 480 dosages of methamphetamine and was therefore a dealer as that
term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $2,400.00 and penalty in the sum of $960.00, plus accrued interest.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
taxpayer to rebut that presumption. In order to rebut the presumption, the Taxpayer must offer evidence to show that the assessment is
not proper.
It is the function of this Board, upon administrative review, to review the record and determine whether the final decision is
proper based upon the evidence presented at the hearing before the Assistant Secretary. From a review of the record the Board
determines that the Taxpayer did not provide sufficient evidence to show that the assessment is not proper. Thus, the Board having
conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole record and the Assistant
Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were supported by competent evidence
in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were fully supported by the findings of
fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
22
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated December 28, 2001 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 435
)
Roberta M. McClure, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Roberta M. McClure
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on June 4,
2002, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by Enforcement Agent R. Earl Smith, of the Unauthorized Substances Tax Division, assessing $2,400.00 tax, $960.00
penalty and $16.00 interest, for a total proposed liability of $3,376.00. The assessment alleged that on November 30, 2001, the
Taxpayer was in unauthorized possession of 480 dosages of methamphetamine.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On April 3, 2002, Eugene
J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed assessment. On
June 4, 2002, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together with penalty and
interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of methamphetamine without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on December 28, 2001, in the sum of
$2,400.00 tax, $960.00 penalty and $16.00 interest, for a total proposed liability of $3,376.00, based upon possession of 480
dosages of methamphetamine.
2. The Taxpayer made timely objection and application for a hearing.
3. The Taxpayer’s knowledge and control of the contents of her property can be reasonably inferred, thus placing her in
constructive possession of the controlled substances found in her home and outbuilding.
4. On November 30, 2001, the Taxpayer had possession of 480 dosages of methamphetamine without proper tax stamps affixed
thereto.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
23
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and this burden was not met.
3. On November 30, 2001, the Taxpayer had possession of 480 dosages of methamphetamine and was therefore a dealer as that
term is defined in G.S. 105-113.106.
4. The Taxpayer is liable for tax in the sum of $2,400.00 and penalty in the sum of $960.00, plus accrued interest.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
taxpayer to rebut that presumption. In order to rebut the presumption, the Taxpayer must offer evidence to show that the assessment is
not proper.
It is the function of this Board, upon administrative review, to review the record and determine whether the final decision is
proper based upon the evidence presented at the hearing before the Assistant Secretary. From a review of the record the Board
determines that the Taxpayer did not provide sufficient evidence to show that the assessment is not proper. Thus, the Board having
conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole record and the Assistant
Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were supported by competent evidence
in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were fully supported by the findings of
fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
24
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated August 13, 2002 )
by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 436
)
Dino Vann Nixon, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Dino Vann Nixon
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on September
17, 2003, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was delivered by
U.S. Mail to the Taxpayer’s last known address of 3300 Waterway Road, East Bend, NC 27018. The notice alleged that on July 30,
2002, the Taxpayer was in unauthorized possession of 965 grams of marijuana, to which no tax stamps were affixed. The notice
proposed an assessment comprised of excise tax in the amount of $3,377.50, penalties totaling $1,351.00, and interest in the amount of
$16.89, for a total proposed tax liability of $4,745.39.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On May 21, 2003, Eugene
J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed assessment. On
September 17, 2003, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together with
penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary and reviewed the final decision entered by the Assistant
Secretary in this matter.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole
record, and the Assistant Secretary’s final decision, concludes that the record does not contain sufficient evidence to confirm the final
decision in this matter. Thus, the Board concludes that the findings of fact made by the Assistant Secretary were not supported by
competent evidence in the record; that based upon the findings of fact, the Assis tant Secretary’s conclusions of law were not fully
supported by the findings of fact; therefore the decision of the Assistant Secretary should be Reversed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision is Reversed.
Made and entered into this 8th day of April 2004.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
25
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
26
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
The Proposed Assessment of Unauthorized )
Substance Tax dated September 17, 2003 )
by the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 437
)
Marshall Neal Morris, )
Taxpayer
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Marshall Neal Morris
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on June 19,
2003, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a notice of proposed assessment was delivered to the Taxpayer by
leaving a copy of same at the Taxpayer’s residence located at 7811 Haverstraw Ct., Charlotte, NC 28212. The notice alleged that
during the 80 weeks prior to September 17, 2002, the Taxpayer was in unauthorized possession of 9,080 grams (20 pounds) of
marijuana, to which no tax stamps were affixed. The notice proposed an assessment comprised of excise tax in the amount of
$31,780.00, penalties totaling $12,712.00, and interest in the amount of $158.90, for a total proposed tax liability of $44,650.90.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On February 19, 2003,
Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the proposed
assessment. On June 19, 2003, the Assistant Secretary issued the final decision, which sustained the proposed tax assessment together
with penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final decision with the
Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary and reviewed the final decision entered by the Assistant
Secretary in this matter.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole
record, the arguments presented, and the Assistant Secretary’s final decision, concludes that the record does not contain sufficient
evidence to determine that the Taxpayer possessed 9,080 grams on marijuana. The Board concludes that the findings of fact made by
the Assistant Secretary were not supported by competent evidence in the record as to the Taxpayer’s unauthorized possession of 9,080
grams of marijuana during the 80 weeks prior to September 17, 2002; that based upon the findings of fact, the Assistant Secretary’s
conclusions of law were not fully supported by the findings of fact regarding Taxpayer’s unauthorized possession of 9,080 grams of
marijuana during the 80 weeks prior to September 17, 2002. Thus, the Board deems it necessary to remand this matter to the Assistant
Secretary for a further proceeding to compute the specific grams of the unauthorized substance that the Taxpayer possessed on
September 17, 2002.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
27
THEREFORE, it is the decision of the Board to Remand this matter to the Assistant Secretary for a further proceeding.
Made and entered into the 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
28
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated September 21, 2001 )
By the Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 438
)
Artellis Robert Owen, )
Taxpayer
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Wednesday, January 14, 2004, pursuant to the petition of Artellis Robert Owen
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on March 19,
2002, sustaining the proposed tax assessment together with penalty and interest against the Taxpayer.
Pursuant to G.S. 105-113.111(a) and G.S. 105-241.1, a Notice of Unauthorized Substance Tax Assessment was issued to the
Taxpayer by R. Earl Smith, Enforcement Agent of the Unauthorized Substances Tax Division, assessing $8,134.00 tax, $3,253.60
penalty and $657.95 interest, for a total proposed liability of $12,045.55. The assessment alleged that on September 20, 2000, the
Taxpayer possessed 2,324 grams of marijuana that did not have the proper tax stamps affixed.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. Pursuant to N.C. Gen. Stat.
§ 105-260.1, Eugene J. Cella, Assistant Secretary conducted a hearing upon Taxpayer’s timely application and objection to the
proposed assessment. On March 19, 2002, the Assistant Secretary issued the final decision, which sustained the proposed tax
assessment together with penalty and interest. Thereafter, the Taxpayer timely filed a petition for administrative review of the final
decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, those
documents are incorporated by reference and are made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. Assessment of Unauthorized Substance Tax was made against the Taxpayer on September 21, 2001, in the sum of $8,134.00
tax, $3,253.60 penalty and $657.95 interest, for a total proposed liability of $12,045.55, based on possession of 2,324 grams of
marijuana.
2. The Taxpayer made timely objection and application for a hearing.
3. On September 20, 2000, the Taxpayer was in constructive possession of 2,324 grams of marijuana.
4. No tax stamps were purchased for or affixed to the marijuana as required by law.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. An assessment of tax is presumed to be correct.
2. The burden is upon the Taxpayer who objects to an assessment to overcome that presumption, and that burden was not met.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
29
3. The Taxpayer had constructive possession of 2,324 grams of marijuana on September 20, 2000, and was therefore a dealer as
that term is defined in G.S. 105-113.106 (3).
4. A finding of “no probable cause” in District Court on the concomitant criminal charges is not binding on the administrative
review of the civil tax assessment.
5. The Taxpayer is liable for $8,134.00 tax, $3,253.60 penalty and interest until date of full payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the as sessment is not proper. It is
the function of this Board, upon administrative review, to review the record and determine whether the final decision is proper based
upon the evidence presented at the hearing before the Assistant Secretary. Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax
assessment is presumed to be correct and the burden is on the taxpayer to rebut that presumption. In order to rebut the presumption,
the Taxpayer must offer evidence to show that the assessment is not proper.
Thus, the Board having conducted an administrative hearing in this matter, and having considered the petition, the briefs, the
whole record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were
supported by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were
fully supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 8th day of April 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
30
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Additional )
Income Tax for the Taxable Year 2001 )
By the Secretary of Revenue of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 439
)
Sabrina R. Haney, )
Taxpayer
THIS MATTER is before the Regular Tax Review Board (hereinafter “Regular Board”) upon petition for administrative
review filed by Sabrina R. Haney (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessment of additional individual income tax liability for taxable year 2001.
Pursuant to G.S. 105-241.1, an assessment proposing additional tax, penalty and accrued interest for taxable year 2001 was
mailed to the Taxpayer on October 8, 2002. The Taxpayer protested the assessment and filed a request for an administrative hearing.
After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on May 6, 2003, that sustained the proposed
assessment against the Taxpayer. Pursuant to G.S. 105-241.2, the Taxpayer filed a notice of intent and petition for administrative
review of the Assistant Secretary’s Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer’s petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayer’s petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer’s petition for administrative review be
and is hereby Dismissed.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Memb er
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
31
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Additional )
Income Tax for the Taxable Year 2001 )
By the Secretary of Revenue of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 440
)
James B. and Melanie A. Dunham, )
Taxpayer )
THIS MATTER is before the Regular Tax Review Board (hereinafter “Regular Board”) upon petition for administrative
review filed by James B. and Melanie A. Dunham (hereinafter "Taxpayers") regarding the Final Decision of Eugene J. Cella, Assistant
Secretary for Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the
proposed assessment of additional individual income tax liability for taxable year 2001.
Pursuant to G.S. 105-241.1, an assessment proposing additional tax, penalty and accrued interest for taxable year 2001 was
mailed to the Taxpayers on October 15, 2002. The Taxpayers protested the assessment and filed a request for an administrative
hearing. After conducting a hearing, the Assistant Secretary of Revenue entered a Final Decision, on June 10, 2003, that sustained the
proposed assessment against the Taxpayers. Pursuant to G.S. 105-241.2, the Taxpayers filed a notice of intent and petition for
administrative review of the Assistant Secretary’s Final Decision with the Tax Review Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayers’ petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxpayers’ petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer’s petition for administrative review be
and is hereby Dismissed.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
32
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Additional )
Income Tax for the Taxable Year 1999, 2000, 2001 )
by the Secretary of Revenue of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 441
)
Mark A. Aneuber, )
Taxpayer )
THIS MATTER is before the Regular Tax Review Board (hereinafter “Regular Board”) upon petition for administrative
review filed by Mark A. Aneuber (hereinafter "Taxpayer") regarding the Final Decision of Eugene J. Cella, Assistant Secretary for
Administrative Hearings of the North Carolina Department of Revenue (hereinafter "Assistant Secretary"), sustaining the proposed
assessments of additional individual income tax liability for taxable years 1999, 2000, and 2001.
Pursuant to G.S. 105-241.1, assessments proposing additional tax, penalty and accrued interest for taxable years 1999, 2000,
and 2001 were mailed to the Taxpayer on November 19, 2002, November 5, 2002, and June 25, 2002. The Taxpayer protested the
assessments and filed a request for an administrative hearing. After conducting a hearing, the Assistant Secretary of Revenue entered
a Final Decision, on June 11, 2003, that sustained the proposed assessments against the Taxpayer. Pursuant to G.S. 105-241.2, the
Taxpayer filed a notice of intent and petition for administrative review of the Assistant Secretary’s Final Decision with the Tax Review
Board.
Pursuant to G.S. 105-241.2(c), the Board has examined the petition, the records and documents transmitted by the North
Carolina Secretary of Revenue pertaining to this matter; and it appearing to the Board that the Taxpayer’s petition should be dismissed
since the grounds and arguments upon which relief is sought have been repeatedly rejected by the Courts and are deemed lacking in
legal merit. Thus, the Board concludes that Taxp ayer’s petition for administrative review is frivolous and is filed for the purpose of
delay.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Taxpayer’s petition for administrative review be
and is hereby Dismissed.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
33
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Unauthorized )
Substance Tax dated July 26, 2002 by the )
Secretary of Revenue )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 442
)
Terry Eugene Woods, )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Tuesday, April 13, 2004 pursuant to the petition of Terry Eugene Woods
(hereinafter “Taxpayer”) for administrative review of the final decision entered by the Assistant Secretary of Revenue on July 21,
2003, sustaining a proposed assessment of unauthorized substance tax dated July 26, 2002.
Pursuant to N. C. Gen. Stat. § 105-113.111 and N. C. Gen. Stat. § 105-241.1(a) and (b), a notice of proposed assessment was
delivered to the Taxpayer by U.S. Mail at his last known address of 3409 Corbett Road, Mebane, NC 27203. The assessment alleged
that on July 16, 2002, the Taxpayer was in unauthorized possession of 624.9 grams of cocaine and 4,606.7 grams of marijuana on July
16, 2002, to which no tax stamps were affixed. The notice proposed an assessment comprised of excise tax in the amount of
$47,347.50, penalties totaling $18,949.80, and interest in the amount of $236.87.
The Taxpayer protested the assessment and requested a hearing before the Secretary of Revenue. On April 17, 2003, Eugene
J. Cella, Assistant Secretary of Revenue, conducted a hearing upon Taxpayer’s timely application and objection to the proposed
assessment. On July 21, 2003, the Assistant Secretary issued the final decision that sustained the assessment based upon the
possession of 612.8 grams of cocaine and 4,466.5 grams of marijuana. Thus, the final decision adjusted the assessment to an excise
tax liability in the amount of $46,284.50, penalties totaling $18,513.80, and interest until date of full payment. Thereafter, the
Taxpayer filed a petition for administrative review of the final decision with the Board.
ISSUE
1. Did the Taxpayer have actual and/or constructive possession of cocaine and marijuana without the proper tax stamps affixed?
2. Is the Taxpayer subject to the assessment of unauthorized substance excise tax?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision.
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. On July 26, 2002, an assessment of unauthorized substance tax was made against the Taxpayer comprised of excise tax in the
amount of $47,347.50, penalties totaling $18,949.80, and interest in the amount of $236.87, based upon the Taxpayer’s
possession of 624.9 grams of cocaine and 4,606.7 grams of marijuana. Notice of said assessment was delivered to the
Taxpayer by U.S. Mail.
2. Upon being assessed, and in a timely manner, the Taxpayer requested in writing an administrative tax hearing.
3. According to the SBI lab report the substances at issue are cocaine weighing 612.8 grams and marijuana weighing 4,466.5
grams.
4. Neither the Taxpayer nor anyone representing the Taxpayer submitted any arguments or evidence that would tend to
contradict the assessment.
5. On July 16, 2002, the Taxpayer possessed 612.8 grams of cocaine and 4,466.5 grams of marijuana.
6. No tax stamps were purchased for or affixed to the marijuana and cocaine as required by law.
CONCLUSIONS OF LAW
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
34
The Board reviewed and considered the following conclusions of law entered by the Assistant Secretary in his decision
regarding this matter:
1. Based on the foregoing findings of fact, which are supported by a preponderance of the evidence, an assessment of
unauthorized substance tax against the Taxpayer is appropriate.
2. Without authorization, the Taxpayer had constructive possession of 612.8 grams of cocaine and 4,466.5 grams of marijuana
on July 16, 2002, and was therefore a “dealer” as that term is defined in N.C.G.S. 105-113.106(3).
3. The Taxpayer is liable for excise tax in the amount of $46,284.50, penalties totaling $18,513.80, and interest until date of full
payment.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-241.2(b2).
After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or increase
the assessment or decision of the Secretary.”
Pursuant to N.C. Gen. Stat. § 105-241.1(a), a proposed tax assessment is presumed to be correct and the burden is on the
taxpayer to rebut that presumption. In order to rebut the presumption, the taxpayer must offer evidence to show that the assessment is
not correct. It is the function of this Board, upon administrative review, to review the record and determine whether the final decision
is proper based upon the evidence presented at the hearing before the A ssistant Secretary.
The Board having conducted an administrative hearing in this matter, and having considered the petition, the brief, the whole
record and the Assistant Secretary’s final decision, concluded that the findings of fact made by the Assistant Secretary were supported
by competent evidence in the record; that based upon the findings of fact, the Assistant Secretary’s conclusions of law were fully
supported by the findings of fact; therefore the decision of the Assistant Secretary should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
35
STATE OF NORTH CAROLINA BEFORE THE
TAX REVIEW BOARD
COUNTY OF WAKE
IN THE MATTER OF:
)
The Proposed Assessment of Sales and Use )
Tax for the period January 1, 1997 through September 30, )
2000, by the Secretary of Revenue of North Carolina )
) (ADMINISTRATIVE DECISION)
vs. ) Number: 443
)
Old Man Precision Automotive, Inc., )
Taxpayer )
This Matter was heard before the Regular Tax Review Board (hereinafter “Board”) in the City of Raleigh, Wake County,
North Carolina, in the office of the State Treasurer, on Tuesday, April 13, 2004, upon a petition filed by Old Man Precision
Automotive, Inc. (hereafter “Taxpayer”) for administrative review of the Final Decision of the Assistant Secretary of Revenue entered
on April 2, 2002, sustaining the sales and use tax assessment imposed against the Taxpayer for the period of January 1, 1997 through
September 30, 2000, per the notice of amended sales and use tax assessment, dated March 19, 2002.
Chairman Richard H. Moore, State Treasurer, presided over the hearing with ex officio member Jo Anne Sanford, Chair,
Utilities Commission and duly appointed member, Noel L. Allen, Attorney at Law participating.
ISSUE
The issues considered by the Board on review of this matter are stated as follows:
1. Is the amount of the assessment correct?
2. Was the Taxpayer “engaged in business” as a retailer in North Carolina and liable for collecting sales or use tax on the sales
of automotive parts to customers in this State?
EVIDENCE
Pursuant to N.C. Gen. Stat. § 105-241.2(b), the Board reviewed all the documents, records, data, evidence and other materials
that the parties presented at the hearing before the Assistant Secretary. Based upon the Board’s review of the documentation, that
evidence is incorporated by reference and is made a part of this administrative decision
FINDINGS OF FACT
The Board reviewed and considered the following findings of fact entered by the Assistant Secretary in his decision regarding
this matter:
1. The Taxpayer sold complete automobile racing transmissions during the audit period.
2. The Taxpayer primarily received orders from customers in North Carolina for specialty transmissions that were used by
customers in automobile races.
3. The Taxpayer purchased complete transmissions and transmission parts exempt from sales or use tax in New York.
4. When the Taxpayer sold transmissions in North Carolina, it shipped complete transmissions and/or transmission parts to
transmission builders (subcontractors) in North Carolina who assembled or modified the transmissions to meet the
customers’ specifications.
5. The Taxpayer had ownership of property (stock transmissions and parts) consigned to its subcontractors for assembly, repair,
or modification in this State throughout the audit period. The property held by the subcontractors for and on behalf of the
Taxpayer is construed as inventory the Taxpayer stored temporarily, directly, or indirectly at locations for distribution in this
State.
6. One of the Taxpayer’s subcontractors is Progear, a proprietorship operated by Kenneth C. Bainbridge, son of Kenneth A.
Bainbridge, the Taxpayer’s corporate president.
7. After the subcontractors finished their work, the completed transmissions were distributed from their locations. The
customers either picked up the transmissions at the subcontractors’ places of business or the subcontractors delivered the
transmissions to the customers’ locations.
8. The Taxpayer mailed invoices from its New York location to customers who had taken delivery of the completed
transmissions in North Carolina from the Taxpayer’s subcontractors .
9. The Taxpayer did not charge, collect or remit North Carolina State or local sales or use tax on invoices issued to customers in
North Carolina during the audit period.
IN ADDITION
19:01 NORTH CAROLINA REGISTER July 1, 2004
36
10. The customers mailed their payments directly to the Taxpayer in New York.
11. The Department assessed tax on the Taxpayer’s sales of transmissions to customers in North Carolina.
12. The Notice of Proposed assessment was mailed to the Taxpayer on November 7, 2000.
13. The Taxpayer notified the Department that it objected to the assessment on December 5, 2000 and timely requested a hearing.
CONCLUSIONS OF LAW
The Board reviewed and considered the following conclusions of law made by the Assistant Secretary in his decision
regarding this matter:
1. The Taxpayer was, at all material times, a retailer engaged in the business of making retail sales of tangible personal property
subject to sales or use tax.
2. The Taxpayer’s North Carolina subcontractors, including Progear, acted as the Taxpayer’s representatives by delivering
property on behalf of the Taxpayer that it had agreed to sell to customers in North Carolina. Therefore, the Taxpayer’s
subcontractors/representatives “transacted business” on its behalf in this State within the purview of G.S. 105-164.8(b)(3).
3. Whereas the Taxpayer’s representatives transacted business on its behalf in North Carolina; the Taxpayer held inventory
stored at its subcontractors’ locations which functioned as temporary storage places in this State; and the Taxpayer’s
subcontractors delivered transmissions sold to customers from the subcontractors’ locations functioning as places of
distribution for the Taxpayer in this State; the Taxpayer was “engaged in business” in North Carolina within G.S. 105-
164.3(5).
4. The general rate of state tax and the applicable local tax is due on the Taxpayer’s sales of transmissions delivered by its
representatives to customers in North Carolina under G.S. 105-164.4.
5. The additional tax assessed is presumed to be correct under G.S. 105-241.1(a), and the burden is upon the Taxpayer to
overcome the presumption of correctness.
DECISION
The scope of administrative review for petitions filed with the Tax Review Board is governed by N.C. Gen. Stat. § 105-
241.2(b2). After the Tax Review Board conducts an administrative hearing, this statute provides in pertinent part:
(b2). “The Board shall confirm, modify, reverse, reduce or
increase the assessment or decision of the Secretary.”
Assessments of tax are presumed to be correct and the taxpayer has the burden to show that the assessment is not proper.
Having reviewed the record, the Board determines that there is sufficient evidence to show that the Taxpayer was engaged in the
business of making retail sales of racecar transmissions during the period at issue. Thus, the Board concludes that the Taxp ayer failed
to furnish evidence to show that the assessment is not proper. The Board, after conducting an administrative hearing in this matter,
and after considering the petition, the brief, the whole record and the Assistant Secretary’s final decision, concludes that the findings
of fact made by the Assistant Secretary were supported by competent evidence in the record; that based upon the findings of fact, the
Assistant Secretary’s conclusions of law were fully supported by the findings of fact; therefore the decision of the Assistant Secretary
should be confirmed.
WHEREFORE, THE BOARD ORDERS that the Assistant Secretary’s final decision be confirmed in every respect.
Made and entered into this 2nd day of June 2004.
Signature_________________________________
Richard H. Moore, Chairman
State Treasurer
Signature_________________________________
Jo Anne Sanford, Member
Chair, Utilities Commission
Signature_________________________________
Noel L. Allen, Appointed Member
PROPOSED RULES
19:01 NORTH CAROLINA REGISTER July 1, 2004
37
Note from the Codifier: The notices published in this Section of the NC Register include the text of proposed rules. The agency
must accept comments on the proposed rule(s) for at least 60 days from the publication date, or until the public hearing, or a
later date if specified in the notice by the agency. If the agency adopts a rule that differs substantially from a prior published
notice, the agency must publish the text of the proposed different rule and accept comment on the proposed different rule for 60
days.
Statutory reference: G.S. 150B-21.2.
TITLE 01 – DEPARTMENT OF ADMINISTRATION
Notice is hereby given in accordance with G.S. 150B-21.2 that
the State Building Commission intends to amend the rule cited
as 01 NCAC 30D .0302.
Proposed Effective Date: November 1, 2004
Public Hearing:
Date: July 27, 2004
Time: 12:30 p.m. – 1:30 p.m.
Location: New Education Building, 301 North Wilmington
Street, Main Level Conference Room (behind Receptionist),
Raleigh, NC
Reason for Proposed Action: This amendment was adopted by
the State Building Commission in March 2004.
Procedure by which a person can object to the agency on a
proposed rule: Written objections may be submitted to the
Director of the State Construction Office. Objections will be
received by mail, delivery service, hand delivery or facsimile
transmission. Objections may be directed to: Speros Fleggas,
Director, NC State Construction Office, MSC 1307, Raleigh, NC
27699-1307. Fax (919)807-4110.
Written comments may be submitted to: Speros Fleggas,
Director, State Construction Office, 1307 Mail Service Center,
Raleigh NC 27699-1309, Phone (919)807-4100, Fax (919)807-
4110, Email speros.fleggas@ncmail.net.
Comment period ends: August 30, 2004
Procedure for Subjecting a Proposed Rule to Legislative
Review: Any person who objects to the adoption of a permanent
rule may submit written comments to the agency. A person may
also submit written objections to the Rules Review Commission.
If the Rules Review Commission receives written and signed
objections in accordance with G.S. 150B-21.3(b2) from 10 or
more persons clearly requesting review by the legislature and the
Rules Review Commission approves the rule, the rule will
become effective as provided in G.S. 150B-21.3(b1). The
Commission will receive written objections until 5:00 p.m. on
the 6th business day preceding the end of the month in which a
rule is approved. The Commission will receive those objections
by mail, delivery service, hand delivery, or facsimile
transmission. If you have any further questions concerning the
submission of objections to the Commission, please call a
Commission staff attorney at 919-733-2721.
Fiscal Impact
State
Local
Substantive (>$3,000,000)
None
SUBCHAPTER 30D - STATE BUILDING COMMISSION
DESIGNER AND CONSULTANT SELECTION POLICY
SECTION .0300 - SELECTION OF DESIGNERS
OR CONSULTANTS
01 NCAC 30D .0302 PRE-SELECTION
A pre-selection committee shall be established for all projects
requiring professional service. On minor projects the pre-selection
committee shall consist of at least the Capital Projects
Coordinator, a representative of the using agency and one
representative from the State Construction Office. On major
projects the pre-selection committee shall consist of at least the
Capital Projects Coordinator, a representative of the using
agency and two representatives from the State Construction
Office. At least one member of all pre-selection committees
shall be a licensed design professional.
(1) General Procedure for All Projects: The
Capital Projects Coordinator shall review with
the using agency the requirements of the
project. This step should normally take place
prior to public advertisement in the Purchase
Directory, because designers and consultants
have a significant need to know in advance the
program intent of a project in order to
demonstrate their qualifications for the project
in their letter of interest. The Capital Projects
Coordinator shall receive all letters of interest
and other qualification information either
directly or from the designated contact person.
After a pre-selection priority list is prepared,
the list will remain confidential except to the
Secretary of the SBC. If fewer than three
letters of interest are received on major
projects, the project will be readvertised in the
Purchase Directory. If fewer than three letters
of interest are received following the re-advertisement,
the Capital Projects
Coordinator may proceed with the selection
process using the data received or may
advertise again.
(2) Special Procedures for Minor Projects: The
Capital Projects Coordinator shall again
review with the using agency the requirements
of the project and the qualifications of all firms
expressing interest in a specific project. The
PROPOSED RULES
19:01 NORTH CAROLINA REGISTER July 1, 2004
38
Capital Projects Coordinator and a
representative of the using agency shall meet
with the representative from the State
Construction Office for the evaluation of each
firm and development of a list of three firms in
priority order to be presented to the SBC. The
Capital Projects Coordinator may institute the
interview procedures, under major projects,
where special circumstances dictate such need.
The Capital Projects Coordinator shall submit
to the Secretary of the SBC the list of three
firms in priority order, including pre-selection
information and written recommendations, to
be presented to the SBC. The Capital Projects
Coordinator shall state in the submission to the
SBC that the established rules for public
announcement and pre-selection have been
followed or shall state full particulars if
exceptions have been taken.
(3) Special Procedures for Major Projects: The
pre-selection committee shall review the
requirements of a specific project and the
qualification of all firms expressing interest in
that project and shall select from that list not
more than six nor less than three firms to be
interviewed and evaluated. The pre-selection
committee shall interview each of the selected
firms, evaluate each firm interviewed, and
rank in order three firms. The Capital Projects
Coordinator shall state in his submission that
the established rules for public announcement
and pre-selection have been followed or shall
state full particulars if exceptions have been
taken.
(4) Special Procedures for Emergency Projects:
On occasion, emergency design or
consultation services may be required for
restoration or correction of a facility condition
which by its nature poses a significant hazard
to persons or property, or when an emergency
exists. Should this situation occur, in all
likelihood there will not be sufficient time to
follow the normal procedures described herein.
The Capital Projects Coordinator on these rare
occasions is authorized to declare an
emergency, notify the State Construction
Office and then obtain the services of a
competent designer or consultant for
consultation or design of the corrective action.
In all cases, such uses of these emergency
powers will involve a written description of
the condition and rationale for employing this
special authority signed by the head of the
agency and presented to the SBC at its next
normal meeting. Timeliness for obligation of
funds or other non-hazardous or non-emergency
situations do not constitute
sufficient grounds for invoking this special
authority.
(5) Annual Contract: A Funded Agency or a
Using Agency may require the services of
designer(s) or consultant(s) for small
miscellaneous projects on a routine basis. In
such cases, designer(s) or consultant(s) for
annual contracts will be selected in accordance
with the above procedures for minor projects.
In addition, no annual contract fee will exceed
One Hundred Fifty Thousand Dollars
($50,000.00) ($150,000) in total volume and
no single fee shall exceed Ten Thirty Six
Thousand Dollars ($10,000). ($36,000).
Annual contracts may be extended for one
additional year. However, if extended for an
additional one-year period, the designer may
not be selected for the next annual contract.
Total annual fees will not exceed One
Hundred Fifty Thousand Dollars ($50,000.00)
($150,000) for first year or One Three
Hundred Thousand Dollars ($100,000)
($300,000) for two-year period. If and when
these fees are used to limit, the agency must
readvertise.
(6) Special Procedures for Department of
Environment